Predictions for 2025: Macro and Markets

We’re in a post-pandemic productivity-led boom, accelerated by the advent of consumer-accessible artificial intelligence. There is no reason to expect a recession until there is a reason, and right now there is no reason. Tariffs won’t make any difference. Inflation will not resurge as the Fed eases, but will linger somewhat above target. Market expectations for two Fed rate cuts are about right, consistent with a higher neutral rate in a productivity-led boom. Stocks will perform well, but it will be hard to match the prior two years’ performance given present valuations. Overweight relatively undervalued winners from the deregulation that will come quickly and easily once Trump is in office: small cap, banking and energy. Long-term yields won’t see 4% again, and will likely see 5% – consistent with a productivity-led boom. Oil is well supplied globally; supply will increase with deregulation, but so will demand.