In the Markets Now: 2,025 Things for 2025

610 (thousand, new home sales, SAAR)

Lowest since Nov. 2022. Since the Fed started cutting rates, long-term bond yields have actually risen, stifling both building activity and buyer demand. To continue the soft landing, Strategas argues that the parts of the economy that have been weak (e.g., housing) need to turn up before those parts that have been strong (e.g., consumer) turn down. Rates need to stabilize – and likely drift lower – before this can begin in earnest.

512% (S&P 500 outperformance of MSCI World ex-US, last 15 years)

A key question facing investors in 2025 is, “Can US equity outperformance continue?” While America’s economic resilience and innovation leadership have fueled the run, a strong dollar is another key factor. Since 1988, the US outperforms World ex-US by a median 9% in years when the dollar rises and underperforms by 6% when the dollar weakens. President-elect Trump has argued for a weaker dollar, but if the US economy remains strong, US stocks remain a vacuum for global capital, and US interest rates remain high, it’s hard to see a path for the dollar to weaken materially, creating a high bar for international to best the US.

$279 (billion, U.S. trade deficit with China, 2023)

Or, the difference between how much the U.S. imports from China vs. exports to China. Larger than the entire EU + Canada, and a key catalyst for President-elect Trump’s threats for ever-larger tariffs (a persistently large deficit can be a signal of unfair trade practices that hurt domestic industry). Strategas estimates that a universal tariff is unlikely (with threats more a negotiating tool), but that China tariffs are probable, writing: “Trump’s authority to raise tariffs on China is clear and does not require the same level of authority as a universal tariff.” Game on.

$274 (consensus estimate, 2025 S&P 500 earnings per share)

Profits – the bedrock of stock prices – are expected to rise 14% next year. Analysts are forecasting all 11 sectors will see growth, though unsurprisingly, Tech is expected to lead the way. With the market looking expensive vs. history, it wouldn’t be surprising if earnings growth were a greater driver of market performance than in recent years, making companies’ ability to deliver on profitability estimates all the more critical in 2025.

178% (average bull market return since 1928)

While the stock market has spent much of 2024 notching new all-time high after new all-time high, the 75% total return since the Oct. 2022 bear market bottom is actually still well short of average bull market performance. What’s more, over the last 75 years, the S&P 500 has returned over 20% in a year on 28 separate occasions. For those occasions, the median return in the following year was 14%. A common investor concern of late is that “this market run can’t last.” The data just might disagree.

$126 (billion, construction spend in computer/ electronic/ electrical industries, SAAR)

Given the concentration of US stock indexes in Big Tech, A.I. is a key driver of markets’ long-term potential. On that front, it’s hard to overstate the boom in spending on A.I. infrastructure since late 2022. Private construction spending in key tech industries has gone vertical, including a doubling of data center construction in just two years. The big question now is whether all of this investment will actually pay off with rising sales, enhanced profitability, and, ultimately, higher share prices. There are promising signs, but it is early yet. To me, this remains the most pivotal question for markets into the late 2020s.

$31 (average hourly earnings, production/non-supervisory workers)

A solid job market and strong wage growth is fueling the consumer spending boom that has propped up the economy and defied expectations for a 2023-24 recession. Inflation has weighed on sentiment, but the reality is that people are working at a near-record clip and wages for the average worker have outpaced inflation since 2020 began. Immigration reform could weigh on labor supply and boost wages further, though may also be inflationary if done at scale.

15% (median S&P return in a president’s first year since WWII)

The first year of a president’s term is often busy and volatile, particularly when there is a change of party. But much like election years, this din should not scare investors. Over the last ten election cycles, the market has been up a median 21% in the president’s first year, with only one down year in the bunch. We will be bombarded with a lot of noise in 2025, but little will be news and even less will demand investor action.