Some people like Groucho Marx said, “I refuse to join any club that would have me as a member.” This made me think of that quote as I read one strategist’s complaint.
There is now “consensus” that everything President-elect Trump does is “just a start” of his negotiations. This makes me worry that the market has become too relaxed. “We were arguing for this view, but it’s amazing how quickly it seems to have become a trade that everyone agrees on,” says Peter Tchir of Academy Securities.
Everyone has also agreed on what they think will happen in the U.S. stock market in 2025. There isn’t a single prediction from the sell-side that the stock market will get worse. MarketWatch’s calculations show that the average goal on Wall Street is for the S&P 500 to rise to 6,600, which is a 9% increase from where it is now.
Steven Ricchiuto and his team of strategists at Mizuho Securities USA say that the expected rise will keep price-to-earnings multiples in the 23–24 times range, which is expensive but not way too high.
“This call for a continued bull market seems reasonable, especially if you think inflation will stay below 3%.” This would let the Fed keep its focus on slowly lowering the Fed funds rate to 4%, which is what the futures market is discounting right now, they say.
They say that analysts might be a little too cautious because earnings are expected to go up. They say there’s good reason to be worried, since the market has grown faster than earnings for two years in a row and Trump’s big plans could cause prices to rise.
The most important risk for the financial markets in 2025, they say, is rising long-term rates and a reversal of the curve at higher rates.
If growth speeds up while the job market is already full, inflation could rise in the United States, and a weaker currency would slow down decline in goods around the world.
