Key Points
- Many Wall Street analysts predict that the stock market will remain flat or experience only small gains in 2025.
- The main reasons for the gloom are the unpredictable effects of trade tariffs and the risk of a recession.
- The market began the year at a high point, leaving little room for major growth.
- Financial advisors say that if you’re saving for the long haul, you shouldn’t worry about short-term forecasts.
After two years of impressive growth, many Wall Street analysts are telling investors to lower their expectations for 2025. The consensus is that the U.S. stock market will end the year either flat or with only very small gains.
So, what’s behind the gloomy forecast? The main reason is a big cloud of uncertainty hanging over the economy. The stock market started the year at a very high point, leaving little room for more growth. Additionally, it’s challenging to predict the impact of President Trump’s new trade tariffs on prices and inflation. The risk of a recession is also a major concern.
“It’s all the volatile actors in our current economy,” said one financial planner. “It’s like you don’t know from one day to the next: Do we have tariffs? Do we not have tariffs?”
Another reason for the low forecasts is that analysts tend to be cautious. No one wants to make a bold prediction and be wrong, so their estimates often bunch together on the conservative side.
So, what should the average person do if the market is expected to go sideways? For most people, the best advice is to do nothing at all. If you’re investing for the long term, like for retirement, you shouldn’t worry about short-term predictions. Market downturns are usually brief.
However, there’s a more nuanced answer. Some investment firms, such as Vanguard, are also predicting lower-than-average returns for U.S. stocks over the next decade. Their advice is to diversify. This might be a good time to review your portfolio and ensure you have a diversified mix of investments, including international stocks, small-cap stocks, and bonds.
