Ten Things For 2025

 

Coming up with a “Ten Things For 2025” list has admittedly been quite difficult. This stems from the fact that 2024 ended up being a year marked by civil unrest, dramatically shifting voting patterns in the election, and a big shift in how people access their news and how they perceive those who deliver the news. The financial markets displayed a great deal of confusion, but in the end, stocks were way up and the rally appeared more broad-based. Going into 2025, things are smooth on the surface, but there is a lot going on underneath that will eventually come to the surface.

Every December, Byron Wien who was the former US Investment Strategist at Morgan Stanley would issue his “10 Surprises” column for the upcoming year. He defined surprises as events that were outside the consensus thinking, but which he thought had a better than 50% probability of happening. I imagine that Mr. Wien would have a field day with the current conditions. This is my inspiration for what I call my “10 Things,” for the upcoming year. Mr. Wien’s focus for his “10 Surprises” list focused on the economy and markets. And I do have some predictions in this area.  Some of my Things are in line with consensus thinking and some will be way outside of the consensus. Last year, two of my predictions for 2024 came through. I had said then that Joe Biden would not be the Democrat’s nominee for President and that the Federal Reserve would only cut interest rates twice (consensus was for 6 cuts). The Fed cut rates for the third time this year just yesterday.

This past year has been one of civil unrest, most notably shown in the two assassination attempts on Presidential candidate Donald Trump. United Healthcare CEO Brian Thompson was assassinated and CashApp co-founder Bob Lee were also murdered, both in targeted hits. San Francisco 49ers first-round draft pick Ricky Pearsall was shot during an attempted robbery. Fortunately, he recovered and played for the 49ers this season. Unfortunately, I think we will see a lot of continued civil unrest in 2025.

Stock market is way overvalued. Stocks do not go into bear markets simply because they are overvauled. They keep going up until they don't. There is usually some sort of financial event that creates a bear market, and the conditions seem to be getting more and more ripe for some sort of credit event to occur.

Economy built on a mountain of debt. Personal debt, government debt is off the charts. Interest on federal government debt is at a record high. This is going to get worse as 5-year and 10-year Treasury notes mature and are rolled over into higher interest rate notes. Initial projections for FY 2025 budget deficit ran $2.3 billion. That budget deficit is now projected to run over $3 trillion. Household debt is manageable as long as employment stays strong. But cracks are developing there. Over the past 16 months, full-time employment (the highest quality jobs) has declined by 1.4 million. The entire creation of jobs over that time has come from contract jobs, gig economy jobs, part-time and seasonal jobs. Further cracks in employment could spell big trouble for household debt, and we may already be seeing this in credit card debt.

Now, onto my “Ten Things For 2025”:

1.      The Federal Reserve’s first interest rate action in 2025 will be to raise interest rates. We have seen 3 rate cuts in 2024, and this has been followed by higher inflation readings and higher long-term rates. The combination of lower short-term rates and higher long-term rates is called the steepening of the yield curve. A steepening yield curve is generally interpreted as a positive event for the economy, and I do expect to see some strong economic numbers coming in the first half of 2025. The Fed has indicated that they are in no hurry to cut rates further. There may not be any rate actions in 2025, but if we do see signs of an over-heating economy, the Fed will be raising rates. They do not want to repeat the mistake of 2021 in which they called inflation “transitory” and that no increases were needed. Inflation only became transitory because the Fed raised rates.

2.      The stock market will return 10% in 2025. I see all the gains coming in the first half of the year and then we will see a flattening out of returns in the second half.

3.      There will be a credit event in 2025. Debt is basically funding all of the strength in the US economy. Debt is one of those areas that show on the surface that things are manageable, the trends appear to be going in the wrong direction. Overall household debt is at a record $17.94 trillion dollars. Credit card debt, which is at a record high $1.17 trillion is particularly concerning. Delinquency rates are still manageable, but that rate has more than doubled since Q3 2021 (1.5% to 3.2%) and it is quickly heading toward problem areas (4%-5%). The current rate is higher than pre-pandemic levels and the highest rate since 2012. The recent stock market rally has also been funded with debt. Margin debt was $890 billion at the end of November, representing a 35% year-over-year increase. Any drop in stock prices could trigger margin calls, which will make that problem even worse. While I am not foreseeing a major credit event in 2025, it will be big enough to be noticed.

4.      Online sports gambling will become a mini-epidemic. The lure of easy money – a tale as old as time. I have a friend who once made the observation that all those fancy casinos in Las Vegas were not built on the backs of gamblers who won. And yet many will try and very, very few will succeed. My guess is that many of those gambling accounts are being funded with credit card debt, which creates a bigger problem with overall debt. Many men get into sports betting because they think they know sports. They have no idea that sports and sports betting are two different things (largely because of odds and point spreads). This problem could also be a manifestation of a bigger societal problem of young men “opting out” of society.

5.      MSNBC will cease to exist as a political commentary channel. Comcast, which owns both NBC News and MSNBC, has announced that they will split up their company next year and NBC News will be split from MSNBC. This is the tell for me as a political commentary channel really needs the strength of a news organization to back it up. Having the backing of a news channel typically adds credibility to the commentary. With MSNBC, the ratings have dropped throughout the year and that drop has accelerated since the election. Being an obvious shill for a political party that is deeply out of favor does not help their cause. Already, we have seen headlines about the on-air talent being offered pay cuts. It is too little, too late. I see the spin-off company wanting to do something like sports or entertainment with this channel.

6.      X (formerly Twitter) will gain momentum as a news source. X owner Elon Musk has been a big proponent of free speech with X, generating mixed results. The 2024 election was, in part, a referendum on the mainstream media, and the MSM did not fare well (which helps explain point #5 above). X was the big winner, with more people turning away from the MSM and towards X. While X is a bit of a Wild West show, with all its messiness, chaos and misinformation, it does need to be noted that the single biggest piece of misinformation during the 2024 election came from the mainstream media and that was the idea that Joe Biden was fit to run for re-election. The messiness of X was on that right away (with a mountain of video evidence), questioning the President’s fitness for office while the MSM swallowed the White House propaganda without question. When President Biden has his disastrous debate vs Donald Trump in June, no one on X was surprised while the MSM felt betrayed.

7.      President Trump will see virtually of his legislatively packages pass in both houses of Congress. The surprise here is that I think we will see at least a small degree of bipartisanship in all of it.

8.      Georgia wins the CFP in January, the Philadelphia Eagles win the Super Bowl in February, and the Florida Gators win the NCAA Basketball Championship in April. Let's face it, if I get one of these three right, it will be a minor miracle.

9.      The Kansas City Royals will win the AL Central, and the Baylor Bears will win the 2025 Big 12 football championship. I am so excited about these two teams next year that they deserve their own line. Plus, I am a deep-seated fan of both, and this is my list and I need this to get me to 10! 

10.  All my best wishes to each of you that 2025 will be better than 2024. For me personally, 2024 has been a very difficult year, and I know that it has been difficult for many others as well. Yet I always look to the future with hope, and I always rest in a God that gives me peace through the most difficult of times. Happy 2025 everyone!