Jumping off his evaluation of 2024 predictions, Bob Doll on New Years Eve released his annual list predicting the economic forecast for 2025.
With a theme of “fewer tailwinds, more tail risks,” the president and CEO of the Houston-based Crossmark Global Investments touched on the possible financial and geopolitical changes that will come with a second Donald Trump presidency. Trump’s campaign in 2024 introduced a mix of policies, Doll says, ranging from tax cuts and deregulation to tariffs and anti-immigration plans. This blend, along with the many changes that will occur once Trump steps into office, has resulted in greater policy uncertainty among consumers.
“As a result, the election outcome has created fatter tails for the U.S. economy. It is possible that a mix of pro-growth and disruption policies will occur simultaneously and/or the administration will toggle back and forth thereby heightening uncertainty as well as economic and financial market volatility,” Doll wrote in his analysis.
Downside risks like trade and immigration policies could further fuel inflation and decrease growth, and potentially lead the Federal Reserve to pull back on tax cuts and resume rate increases, Doll adds.
While a second Trump presidency may push uncertainty around inflation and deficit risks, corporate tax cuts and lower oil prices from increased energy production could lower inflationary pressures, Doll comments. Trump’s intention to loosen regulations could also lead to an upswing in mergers and acquisitions (M&A) as financial institutions take advantage of reduced regulatory scrutiny.
Doll cautions that even though the stock market is already pricing in an optimistic backdrop and is carrying high valuations, it’s not without risk as the U.S. enters 2025. “An early in the new year 5-10% pullback is possible (if not probable) given the sharp gains, froth in sentiment, and stretched valuations, leaving the market vulnerable to bad news or simply in need of consolidation,” he alerts.
Below is a full list of Bob Doll’s 2025 predictions:
1. Economic growth slows as the unemployment rate rises past 4.5%.
2. Inflation remains sticky, fails to reach the Fed’s 2% target, and causes Fed funds rate to fall less than expected again.
3. Treasury 10-year yields trade primarily between 4% and 5% as credit spreads widen.
4. Earnings fail to achieve consensus a) 14% growth and b) every sector has up earnings.
5. Equity volatility rises (VIX average approaches 20 for only the third year in 14).
6. Stocks experience a 10% correction as stocks fail to keep up with earnings (i.e., P/Es contract).
7. Equal-weighted portfolios beat cap-weighted portfolios (average manger beats index), and value beats growth.
8. Financial, energy, and consumer staples outperform healthcare, technology, and industrials.
9. Congress passes the Trump tax cut extension, reduces regulation, but tariffs and deportation are less than expected.
10. DOGE efforts make progress but fall woefully short of $2 trillion per year of savings.
SEE ALSO:
Bob Doll Grades his 10 Predictions for 2024
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
