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Trying to accurately predict where the stock market will go in 2025 is futile. But if I had to guess, I'd say it's going to increase.
Because? Because historically the stock market has tended to rise approximately two out of every three years. Or about seven out of every 10 years, on average.
So if I say it will increase every year, I'll be right about 70% of the time, give or take. Those are fantastic odds, much better than the track record of most market commentators!
However, the reality is that the stock market will crash at some point, because history also teaches us that.
But my ISA is ready
Recently, I sold my long-held position at the chip manufacturing equipment supplier. ASMLmaking some profits. I have less conviction in their growth prospects due to increasing restrictions on selling their machines (and potentially after-sales customer support) to China.
I also sold a couple of smaller holdings that I had lost confidence in. They hadn't worked out as I expected and I don't want to double down, so I parted ways.
Consequently, I have quite a bit of cash in my stocks and Shares ISA. If 2025 is a bad year, especially a BIG one, I already have some dry powder.
Risks in sight!
Like I said, I think the market is going up, based on history. But I would be naive if I didn't note some risks.
One is geopolitics, whether it be the Middle East conflict, a serious escalation in Ukraine, or the unresolved dispute between China and Taiwan. Any of these have the potential to send the market into a tailspin.
Another is a possible trade war due to tariffs proposed by Donald Trump. According to analysts from Barclaystariffs can be reduced S&P 500 earnings 2.8% next year. And they could fuel inflation.
Finally, the S&P 500 is highly valued after its meteoric rise of 27.5% so far this year. A little benign profit-taking could quickly turn into an avalanche of selling that would spread to the London Stock Exchange.
One FTSE 100 The stocks I would like to buy at a discounted price are InterContinental Hotel Group (LSE: IHG). The company owns many well-known brands, including InterContinental (obviously), Holiday Inn, and Crowne Plaza.
What I like here is that the company is truly global, so it's not dependent on the UK economy. And its portfolio ranges from luxury spa resorts to budget hotels, catering to all types of travelers.
The share price has performed well, rising 42% in the last year alone. In fact, it's just shy of a record.
Unfortunately, this means the stock is currently trading at 33 times earnings. Of course, IHG is a high quality company, but the valuation is a little high for me.
The stock price doesn't leave much margin of safety in case, say, some event disrupts global travel. Or a rise in inflation reduced the number of people booking vacations and traveling by plane in 2025.
Long term, however, I'm bullish on this stock. IHG has robust loyalty programs that offer benefits that encourage guests to choose their hotels.
Meanwhile, more baby boomers are retiring, with the time and means to explore the world. This presents a significant opportunity for IHG.
