{"id":13602,"date":"2024-12-30T21:40:45","date_gmt":"2024-12-30T21:40:45","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13602"},"modified":"2025-04-14T17:29:34","modified_gmt":"2025-04-14T17:29:34","slug":"4-key-factors-investors-should-watch-in-2025","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/4-key-factors-investors-should-watch-in-2025\/","title":{"rendered":"4 Key Factors Investors Should Watch In 2025"},"content":{"rendered":"\n<p><strong>4 Key Factors to Watch in 2025<\/strong><\/p>\n\n\n\n<p>With just two trading days left in 2024, it\u2019s safe to say it was a stellar year for stocks. For some investors, it may feel like the market has been running too hot. But if we look at just bull market years since 1932, the average annualized return for U.S. stocks is 23%. That puts performance in 2023 and 2024 well within the historical norm.<\/p>\n\n\n\n<p>To be fair, this does not mean that 2025 is destined to be a great year. There are key factors to watch in the new year, four of which I detail below for investors.<sup>1<\/sup><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>What Will the Path of Interest Rates Actually Look Like?<\/strong><\/li>\n<\/ul>\n\n\n\n<p>The Fed has a lot of moving parts to navigate in 2025.<\/p>\n\n\n\n<p>At the moment, the Fed\u2019s core concerns\u2014inflation and the labor market\u2014appear to be stable. The unemployment rate is hovering in a range just above 4%, and the labor force has remained about the same size in the past quarter. The possibility of mass deportations and the almost certain reversal of lax immigration policies are poised to tighten the labor market (increasing job openings relative to unemployed workers), which could increase wage pressure. It will be a factor for the Fed to watch.<sup>2<\/sup><\/p>\n\n\n\n<p>Then there\u2019s inflation. The latest CPI print showed prices rising 2.6% year-over-year in October, a slight pickup from September\u2019s 2.4% pace. On a monthly basis, prices increased at a seasonally adjusted rate of 0.2%, in-line with expectations. Core prices, which strip out volatile food and energy prices, rose 3.3% year-over-year and 0.3% from October. In short, the inflation fight is in a relatively solid place, but it\u2019s not yet won.<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\">Discover Market Opportunities in 2025 with Data-Driven Insights<\/a><\/u><\/strong><\/p>\n\n\n\n<p>As we close out a remarkable 2024 for stocks, many investors are asking: What\u2019s next? With interest rates, inflation, and labor market dynamics all in play, 2025 brings new opportunities\u2014but also key challenges.<\/p>\n\n\n\n<p>Our <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\">December 2024 Stock Market Outlook Report<sup>3<\/sup><\/a><\/u><\/em><\/strong> delivers the actionable insights you need to navigate the year ahead with confidence. This expertly curated guide breaks down:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Post-election market insights <\/strong>\u2013 What political shifts mean for investors.<\/li>\n\n\n\n<li><strong>Key U.S. economic data<\/strong> \u2013 Trends shaping the economy.<\/li>\n\n\n\n<li><strong>Global market analysis<\/strong> \u2013 How international factors could impact your portfolio.<\/li>\n\n\n\n<li><strong>Zacks S&amp;P 500 earnings insights<\/strong><\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click the link below to get your free report today!\u00a0<br><strong><span style=\"text-decoration: underline;\"><a href=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\"><u><br>IT\u2019S FREE.\u00a0<\/u>Download the Just-Released December 2024 Stock Market Outlook<u><sup>3<\/sup><\/u><\/a><\/span><\/strong><\/p>\n\n\n\n<p><strong><em>CPI (blue line) and Core CPI (green line) Year-Over-Year % Change<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"347\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-1-2-1024x347.png\" alt=\"\" class=\"wp-image-13603\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-1-2-1024x347.png 1024w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-1-2-300x102.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-1-2-768x260.png 768w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-1-2.png 1320w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Source: Federal Reserve Bank of St. Louis<sup>4<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n<p>As it stands today, the Fed has cut rates by 100 basis points as the economy has continued growing at a solid pace, which is generally the opposite of what you\u2019d expect to see. The incoming administration has promised fiscal stimulus in the form of tax cuts, and other policies like deregulation are designed to spur growth. That has thrown the path of interest rates into question, as evidenced clearly by Federal Reserve Chairman Jerome Powell\u2019s December statement that \u201cwe\u2019re going to be cautious about further rate cuts.\u201d<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Turning Ideas into Policies<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Long-time investors know that when it comes to policies, it\u2019s important to focus on what politicians and parties <em>do, <\/em>not what they say. With Republicans taking control of Congress and the White House, it\u2019s reasonable to expect that many of the policy proposals from the campaign trail will be pursued. But whether they\u2019re enacted is a different story.<\/p>\n\n\n\n<p>One example is tariffs. President-elect Trump has floated the idea of implementing a 60% tariff on all imports from China and up to 10% on imports from other countries. In response, China has restricted the export of certain essential materials, some of which are critical components in the production of semiconductors, satellites, and night vision equipment. President-elect Trump has also suggested a 25% tariff on goods from Mexico, the U.S.&#8217;s largest trading partner, as well as on Canadian imports. Exchanges like these insert uncertainty into global trade relations, but investors should remain patient to see how it actually plays out.&nbsp;<\/p>\n\n\n\n<p>We could also see significant changes in the regulatory landscape. President-elect Trump is expected to appoint new heads for agencies such as the Federal Trade Commission and the Justice Department&#8217;s antitrust division, which oversees mergers and acquisitions, with nearly 40% of the S&amp;P 500 market cap under scrutiny. These leadership shifts, along with broader changes in Washington, are expected to mark a new era of deregulation. This is generally supportive of earnings and economic growth, but again, investors should take a wait-and-see approach for now.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>A Broadening of Earnings Growth<\/strong><\/li>\n<\/ul>\n\n\n\n<p>In 2023 and 2024, a lion\u2019s share of the market\u2019s strong performance was fueled by some of the U.S.\u2019s largest companies, namely the \u201cMagnificent Seven\u201d mega-cap technology stocks. As of November 30, the Magnificent Seven were up +41% year-to-date versus only 18% for the remaining 493 stocks. That means just seven stocks accounted for an astonishing 47% of the index\u2019s gains.<\/p>\n\n\n\n<p>These strong market returns have come on the back of strong earnings growth. The Magnificent Seven have grown their earnings by 40% compared to the \u2018other 493 stocks\u2019 2% earnings growth. 2025 could see a change in this dynamic.<\/p>\n\n\n\n<p>We expect the \u2018other 493\u2019 stocks in the S&amp;P 500 to grow earnings by 5x relative to 2024, while Magnificent Seven earnings decelerate. This \u2018broadening\u2019 of earnings growth could trigger some rotation in the market, in our view, which may benefit small- and mid-cap stocks over large-cap stocks and perhaps favor non-Technology sectors.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Expecting Lower Yields on Cash<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Though the Fed has indicated its intent to be more cautious about lowering rates, we\u2019ve already seen 100 basis points in cuts\u2014which has led to yields on cash declining in 2024. In my view, we could see cash rates come down even further in the new year, which for investors means seeing cash underperform other asset classes. Indeed, in 10 of the last 12 twelve cutting cycles, stocks and bonds have outperformed cash.<\/p>\n\n\n\n<p>This is not to say that investors should move all of their cash off the sidelines and into other asset classes. As I\u2019ve written many times before, it\u2019s crucial to keep about one year\u2019s worth of income needs in cash, for emergency purposes. But beyond those levels, I\u2019d be looking to deploy that cash into asset classes that have the potential for higher returns, like stocks and bonds.<\/p>\n\n\n\n<p><strong>Bottom Line for Investors<\/strong><\/p>\n\n\n\n<p>Looking ahead to the new year, we\u2019re seeing strong fundamentals pointing to more economic growth, and Zacks sees 13.4% annual earnings growth for S&amp;P 500 companies on 5.5% higher revenues.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"670\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-2-2-1024x670.png\" alt=\"\" class=\"wp-image-13604\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-2-2-1024x670.png 1024w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-2-2-300x196.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-2-2-768x502.png 768w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/12\/image-2-2.png 1430w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>But one final factor investors will need to bear in mind is that the S&amp;P 500 already trades at a relatively high premium relative to expected 2025 earnings\u2014which could make strong upside more challenging to come by. It is certainly possible, but it would require strong upside surprises throughout the year.<\/p>\n\n\n\n<p>In a market like this, staying focused means relying on objective analysis\u2014not speculation or headlines. Understanding where opportunities lie and how evolving market forces could impact your portfolio is essential as we enter 2025.<\/p>\n\n\n\n<p>Our <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\">December Stock Market Outlook Report<sup>5<\/sup><\/a><\/u><\/em><\/strong> delivers the clear, actionable insights you need to stay on track, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Post-election market insights <\/strong>\u2013 What political shifts mean for investors.<\/li>\n\n\n\n<li><strong>Key U.S. economic data<\/strong> \u2013 Trends shaping the economy.<\/li>\n\n\n\n<li><strong>Global market analysis<\/strong> \u2013 How international factors could impact your portfolio.<\/li>\n\n\n\n<li><strong>Zacks S&amp;P 500 earnings insights<\/strong><\/li>\n<\/ul>\n\n\n\n<p> If you have $500,000 or more to invest, request our free <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2024_12_30&amp;content=stock_market_outlook_report\">December Stock Market Outlook Report<sup>5<\/sup><\/a><\/u><\/em><\/strong> today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>2024 has been a great year for stocks, but will the hot market continue? Here are 4 factors that investors should keep an eye on as we head into the new year. <\/p>\n","protected":false},"author":3,"featured_media":13568,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-13602","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13602","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13602"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13602\/revisions"}],"predecessor-version":[{"id":13605,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13602\/revisions\/13605"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13568"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13602"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13602"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13602"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}