Disclaimer: This blog is for informative purposes and should not be taken as professional financial advice.

As we look toward 2025, the investing landscape is filled with opportunities and challenges. After a stellar 2024, where the S&P 500 (The Standard and Poor’s 500, a stock market index tracking the stock performance of 500 of the largest companies in the United States) soared nearly 28%, many investors are wondering what the new year holds. Will the good times keep rolling, or are we heading for a bumpier ride? Here’s a breakdown of what to expect, along with a few tips. 

Some Key Considerations for 2025

According to Morningstar, 2025 will look different in several key ways. Inflation is expected to continue its downward trend, which should ease some of the pressure on consumers and businesses alike. Central banks are likely to cut interest rates further, making cash deposits less attractive and possibly encouraging more risk-taking in equity markets.

Artificial intelligence (AI) remains a dominant theme. Technology companies are expected to continue pouring massive investments into AI, which is likely to be one of the biggest growth drivers of the next decade. However, volatility will remain a constant, especially as the market reacts to geopolitical tensions and potential policy shifts.

Will The Bull Market Continue?

2024 was a year for the record books. The stock market climbed to new highs, extending the gains seen in 2023. The S&P 500 surged almost 28% by the end of December, and U.S. stocks once again outpaced global markets, with a 25% rise. Despite economic concerns, the “bull market” that began in 2022 kept charging forward.

For those who are unfamiliar, a “bull market” is when stock prices are rising or are expected to rise. This period of optimism typically lasts for a few years, and we’ve been riding this wave for over two years now. However, it’s important to keep in mind that these things are usually cyclical.

The Trump Presidency 

One of the most significant developments for 2025 is the return of Donald Trump to the White House. While this brings some uncertainty, especially in terms of trade policies and tariffs, analysts predict a generally favourable environment for investors under his leadership.

Trump’s tax cuts and push for economic growth could provide some tailwinds for U.S. markets. However, there are concerns about his economic policies, including the possibility of new tariffs, which could add volatility to the global markets. If tariffs are imposed, especially on key trading partners like China, it could disrupt the economic balance.

The Risk of Short-Term Volatility

As with any year, expect bouts of short-term volatility. Market conditions are rarely smooth, and 2025 will be no different. Geopolitical tensions, unexpected policy changes, or economic slowdowns can trigger sharp swings in asset prices.

While it’s tempting to panic during market dips, investors would be wise not to overreact to these fluctuations. 

A Breakdown of Key Global Markets:

The United States:

The U.S. economy remains on solid footing, with inflation under control and interest rates on the decline. As central banks loosen their grip on monetary policy, this should create more room for growth. Energy prices are expected to stay stable, and the economy should continue expanding, albeit at a slower pace than in previous years.

However, following a strong 2024, U.S. stocks—especially large-cap companies—are looking a bit pricey. Many of the stocks that led the market last year may offer lower returns in 2025. 

Europe:

Over in Europe, the outlook is more muted. With the European Union facing fiscal austerity measures and weaker domestic demand, growth prospects are limited. The valuation gap between European and U.S. stocks is at a record high, and high-profile delistings on the London Stock Exchange have raised red flags. Still, opportunities do exist, particularly in more defensive sectors or smaller, high-quality companies that may be overlooked by the broader market.

China:

China’s market presents both challenges and opportunities. The country is grappling with an aging population, a struggling property market, and potential trade friction due to Trump’s policies. However, Beijing recently rolled out a stimulus package aimed at spurring economic growth in 2025, and in September, its stock market rallied in response.

South Africa: 

On the plus side, South Africa is showing signs of improvement. Thanks to lower inflation, reduced interest rates, and more reliable electricity supply, the country’s economic momentum should pick up in 2025. The formation of the Government of National Unity (GNU) has also fostered greater investor confidence. Local stock and bond markets, as well as the currency, could see positive momentum. That said, South Africa still faces significant risks, including political instability and external economic factors. 

Conclusion:

2025 promises to be a year full of both opportunities and challenges for investors. There is sure to be some interesting sector-specific growth, such as in Artificial Intelligence (AI), and companies with strong fundamentals and long-term growth potential should always be prioritised. It remains to be seen what impact Trump will have, and for how long this ‘bull market’ might continue. 

But one thing is for sure: the fundamentals of investing should always be remembered. Always stay the course with the long-term in mind and, whatever you do, don’t panic in response to sensational news headlines. For the best chance of positive investment outcomes, consider consulting with a Professional Financial Advisor, like TVC Wealth and Health Managers. Contact us today for a free consultation!

Sources:

https://businesstech.co.za/news/finance/802367/things-are-looking-up-for-south-africa-but-there-are-two-massive-risks/
https://sanlamprivatewealth.sanlam.com/resources/investments/2025-market-outlook-what-can-we-expect/
https://businesstech.co.za/news/finance/802367/things-are-looking-up-for-south-africa-but-there-are-two-massive-risks/
https://www.forbes.com/sites/investor/2024/12/20/top-10-investment-themes-for-2025/
https://www.ft.com/content/ccb13a16-9820-4fc8-9bca-479e44e91909
https://abcnews.go.com/Business/stock-market-soared-year-happen-2025/story?id=116763202
https://www.morningstar.co.uk/uk/news/257713/morningstars-2025-investment-outlook-for-financial-advisors.aspx