How Will the Stock Market Perform in 2025?

Imagine it’s late 2019, and I tell you what the next five years will bring:

A global pandemic that grinds economies to a halt.
Tens of millions of job losses.
Inflation surging to levels not seen in decades.
The Federal Reserve hiking interest rates so aggressively that regional banks collapse, keeping rates elevated for over four years.
Geopolitical conflicts like Russia-Ukraine and Israel-Hamas, alongside domestic political turmoil.

Would you believe this environment would produce annualized S&P 500 returns nearing 20.63%? Probably not—but it did.

The market rewards discipline.

2024 in Review

Now that we’ve closed the books on 2024, let’s reflect on the market’s performance. I use the S&P 500 index as a broad measure of the U.S. stock market. This index represents approximately 500 of the largest companies in the U.S., and in 2024, it returned an impressive 23.31%.

Key metrics for 2024:

Record All-Time Highs: 57
12-Month Return: 23.31%
3-Year Annualized Return (Dec ’21-Dec ’24): 10.41%
5-Year Annualized Return (Dec ’19-Dec ’24): 15.39%
10-Year Annualized Return (Dec ’14-Dec ’24): 13.31%

Since the market’s COVID-era lows nearly five years ago, the S&P 500 has risen an astonishing 155.52%. Few predicted such performance. Headlines from late 2023 were dominated by fears of a market crash, citing concerns like:

Political uncertainty in the U.S.
The Federal Reserve’s monetary policy.
Ongoing wars and global instability.
Economic recession

Forecasting is a losers game

Even with vast resources, major financial institutions and economists often miss the mark:

Harry Dent: The Harvard-educated economist predicted "the biggest crash of our lifetime in 2024," likening it to the Great Depression.

JPMorgan: Bearish, with a target of 4,200.

“JPMorgan said high equity valuations, high interest rates, a weakening consumer, rising geopolitical risks, and a potential recession give it little confidence that stocks will move higher in 2024.”

Morgan Stanley: Neutral, with a target of 4,500.

“Morgan Stanley expects a flat stock market in 2024, but sees some pockets of the stock market performing better than others. The extremely narrow leadership of the mega-cap tech stocks is likely to continue early next year, but eventually breakdown, according to the firm.”

Goldman Sachs: Bullish, with a target of 5,100.

“Goldman Sachs now expects the S&P 500 to finish 2024 about 8% higher from current levels as inflation falls, corporate profits rise, as the Fed shifts to a more dovish position.”

Despite their expertise, none foresaw the S&P 500 soaring by 23.31%. This reinforces an essential truth: forecasting is a loser's game.

Remarkable Resilience

Could negative events impact the market in 2025? Absolutely. But history has shown that the U.S. stock market is remarkably resilient. It has thrived despite unprecedented challenges, thanks to millions of individuals who innovate and tackle problems head-on.

The truth is, we don’t know what the market will do in 2025. Anyone who claims otherwise is misleading themselves—and you. Markets are driven by countless variables, making precise predictions impossible.

Planning for 2025

What separates those who succeed in both good and bad markets? A plan.

A sound strategy captures the upside during strong markets while providing protection when the tide turns. It’s proactive and rooted in discipline, avoiding emotional decision-making.

So, what will 2025 bring? No one knows—but having a plan ensures you’re ready for whatever comes next.

The plan’s purpose is not to predict the future. Rather, get clear about reality, align your financial and emotional capital to the goals, and course correct along the way. The true value in planning is not any single product, plan, or investment, it’s the process and the relationship that it builds.

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Custom Wealth Planners is a Registered Investment Adviser offering services in Iowa and in other jurisdictions where exempt from registration. All views, expressions, and opinions included on this site are for informational purposes only, and should not be relied upon for specific investment, tax, or legal advice. Please consult your own advisor, tax, and legal professionals for how information discussed on this site may apply to your own circumstances.