Ron Gross and Asit Sharma, both Senior Analysts at Motley Fool, discuss the promising sectors for 2025 and the challenges facing companies like Southwest Airlines and Moderna. They highlight the unpredictable nature of market forecasts and the importance of historical perspectives. Best-selling author Morgan Housel shares insights from his book, emphasizing the folly of relying on accurate predictions. The trio also tackles reckless predictions for the year, focusing on standout stocks like Endava and Marvell Technology.
Investors should temper expectations for 2025, projecting modest market returns while monitoring economic indicators and earnings growth closely.
Leadership challenges at companies like Southwest and Moderna highlight the importance of strong management amid market pressures and competition.
Deep dives
Market Outlook for 2025
The S&P 500 has shown impressive growth over the past two years, leading to a cautiously optimistic outlook for 2025. Despite a strong market performance, experts suggest that investors should temper expectations for further outsized gains, highlighting a projected return of around 6%. Historical trends indicate that following two robust years, a more modest performance is common, with a majority of investment firms forecasting continued growth, albeit at a slower pace. As the market heads into the new year, careful monitoring of economic indicators will be crucial for investors.
The Need for Earnings Growth
For the market to maintain its momentum in 2025, earnings growth is essential, supported by healthy GDP figures. Analysts noted that approximately 76% of S&P 500 companies exceeded earnings expectations in the last quarter, surpassing the historical average. Big tech companies will play a critical role in sustaining this growth, as their performance can significantly influence market trends; however, their continued dominance is not guaranteed. A diversification of performance across sectors, including energy and retail, will also be necessary to support overall market strength.
CEO Hot Seats and Comeback Stories
As companies prepare for 2025, several CEOs face mounting pressure amidst challenging market conditions. For example, the CEO of Southwest Airlines is navigating financial struggles, having just settled a proxy fight, while Moderna’s leadership is being scrutinized following significant stock declines and investor impatience with profitability. On the other hand, companies like Lululemon and AMD present potential comeback stories for 2025, with Lululemon attempting to revitalize its brand amidst increasing competition and AMD looking to capitalize on rapid growth in AI and chip technology. The performance of these companies will be closely watched as indicators of market trends.
The Caution of Forecasting
The challenges of making accurate predictions in investing were emphasized, with historical analysis showing poor forecasting track records in finance. Instead of striving for pinpoint forecasts, it is suggested that investors focus on overarching market behaviors and trends, which remain relatively stable over time. Understanding the difference between what is knowable, such as current company performance, versus unpredictable future moods of the market is crucial. This approach allows for better preparation in the face of inevitable market fluctuations and corrections.
New year, new market? We preview what’s in store for investors in 2025, the companies we’re excited to watch and the businesses we’re worried about.
(00:33) Ron Gross and Asit Sharma discuss:
- The state of the stock market as investors head into the new year, the outlook for 2025, and the big questions concentration is creating for investors.
- The corners of the market they’re paying attention to for opportunities.
- Why leadership at Southwest and Moderna is on the hot seat, and which companies seem primed for a turnaround in 2025.
(19:03) This time of year, investors are getting forecasts galore – what the market will return, where interest rates will go. Robert Brokamp and best-selling author Morgan Housel about his latest book Same as Ever, the things that endure, and the follies of following forecasts.
(33:17) Ron and Asit offer up reckless predictions for the new year and break down two stocks on their radar: Endava and Marvell Technology.