On December 31, one minute before midnight, the Waterford Crystal Times Square New Year's Eve Ball will begin its slow descent to commemorate the year 2025.
When the 11,875-pound (5,386 kg) ball lands, we'll say goodbye to the old year, as champagne flows, fireworks explode, and people around the world make their resolutions.
Related: Bets on Fed interest rate cut in 2025 tied to Trump policy wild cards
The S&P 500 will start the new year on a high note.
The index, which tracks the stock performance of 500 of the largest companies listed on U.S. stock exchanges, is up 26.7% so far this year, compared with the rally in the 24.2% from 2023.
The S&P 500 has reached more than 50 all-time highs in 2024, the first of which occurred on January 19.
In November, Donald Trump was elected president for the second time and investors are increasingly focused on what is to come from the policies of the second Trump administration and their possible impact on the market. US Bank Asset Management saying.
During the campaign, Trump promoted several key initiatives, including expanding tax cuts that were part of the 2017 Tax Cuts and Jobs Act, stricter immigration policies, and possible new tariffs on imported goods.
Analysts cite risks for S&P 500 in 2025
Markets will closely monitor the subsequent impact on economic growth and inflation, the investment advisory group said.
“We are still waiting for clarity on whether the policies of the new administration and Congress turn out to be inflationary,” said Eric Freedman, chief investment officer at US Bank Asset Management.
Related: Inflation report adds complexity to bets on interest rate cuts
“As we do not yet have all the details, we prefer to be aware of the short-term opportunities offered by market disruptions, but we do not want to draw conclusions without sufficient evidence,” he added.
The S&P 500 is expected to post its third consecutive year of gains amid strong economic expansion and steady earnings growth, according to Goldman Sachs Research.
David Kostin, chief U.S. equity strategist at Goldman Sachs, wrote last month that the index was projected to rise to 6,500 by the end of 2025, a 9% gain from its current level and a total return of 10%, including the dividends.
The investment firm said the valuations were high by historical standards and could pose a risk to investors. The S&P 500 index's price-earnings multiple has increased 25% over the past two years.
“A stock market that is already pricing in an optimistic macro context and high valuations creates risks going into 2025,” Kostin said.
High multiples are weak signals of short-term profitability and typically increase the magnitude of market downturns when there is a negative shock.
The economy and profits will continue to grow and bond yields will remain around current levels for years to come, according to Goldman Sachs Research's baseline macroeconomic outlook.
But several risks emerge as we approach 2025, the firm said, including the threat of a widespread tariff and the potential for higher bond yields.
At the other end of the spectrum, a friendlier mix of fiscal policy or more dovish policy by the Federal Reserve could generate higher returns, Goldman said.
The fund manager announces his list of big surprises
TheStreet Pro's Doug Kass has dusted off his crystal ball to put together a list of 15 big surprises for 2025.
This is the renowned hedge fund manager 23rd year of compiling an index of surprises to come. And with a nod to singer Bonnie Raitt, Kass wants to give people something to talk about.
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“My list of surprises goes from 15 surprises in 2025, to 10 surprises in 2024… well, because it is such a surprising year with a wide range of unexpected political, social, regulatory, economic and market surprises.” wrote on December 23.
The list covers areas as diverse as politics, sports, artificial intelligence, Tesla. (TSLA) CEO Elon Musk and climate change, which Kass says will affect the United States in the form of rain and floods that will last 500 years.
He said this disaster would cause between $250 billion and $500 billion in damage, about 10 times worse than what Hurricane Katrina caused in 2005, and would take the property insurance industry by surprise.
With insufficient reserves and requiring measures to prevent financial contagion, one of the top 10 property casualty companies will be bailed out by the US government, he predicted.
Kass also had something to say about the S&P 500, and he's a bit bearish.
He says the S&P index would fall about 15%, while the tech-heavy Nasdaq would fall more than 20%.
Kass also said, however, that the EFT equal weight of the S&P 500 (RSP) which equally weights stocks in the benchmark index, will fall 5%.
“Under the weight of ai disappointment, higher interest rates, rising inflation and slower economic growth, financial and technology stocks are among the biggest losers,” he said. “Indices close at their annual low on the last day of 2025.”
Related: Veteran Fund Manager Offers Alarming Forecast for S&P 500
