There are a few more days to go in 2024, but unless something disastrous happens, the stock market will deliver a second consecutive year of impressive gains.
As of the 12/27 close, the S&P 500 is up 25%. The tech-heavy Nasdaq 100 is up about 27%. Hard to be mad about those returns, especially given those indexes returned 24% and 55% in 2023. Consider this point: $10,000 plopped into the Nasdaq 100 at the end of 2022 would be worth over $20,000 now, using a set-it, forget-it approach.
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Those are impressive returns, indeed. But gains aren’t guaranteed. And stocks have a way of disappointing the masses. Will stocks go up again in 2025? Here’s what a top economist at a major firm thinks.
Torsten Slok is a well-known economist at Apollo Global Management (APO) , an alternative investment firm with more than $500 billion in assets under management across real estate, hedge funds, and private equity.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
Slok recently released his 2025 economic outlook for the United States, and, right now, he believes the U.S. economy “remains strong with no signs of major slowing going into 2025.”
He also believes interest rates will likely remain “higher for longer” regardless of the Federal Reserve’s current interest rate-cutting cycle. If Trump’s various policies are implemented (lower taxes, higher tariffs, and reduced immigration), this could lead to higher rates, help raise asset prices, and increase inflation.
Slok points out the U.S. economy has charted its own course in recent years. Factors contributing to the U.S success include:
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Government policies enacted coming out of the Covid-19 pandemic. These helped boost growth but have also left the U.S. with a sizable budget deficit.
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The U.S. economy is less sensitive to increased interest rates. This due in part to homeowners and corporations locking in low rates ahead of the last Fed rate hiking cycle).
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The U.S. has experienced a surge in corporate and research spending in areas like artificial intelligence, data centers, semiconductors, and manufacturing.
Here are Slok’s views on the macroeconomic drivers for 2025:
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GDP Growth: GDP is likely to continue growing at a healthy level of 2.5% in 2025 versus an estimated 2.8% in 2024 and a long-term estimated growth rate of 2.0%.
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Inflation: Inflation has decreased significantly after peaking at over 9% in 2022. Looking ahead, Apollo believes it will take longer for inflation to reach the Fed’s stated goal of 2.0%. In 2025, Apollo sees CPI and core CPE inflation rising by 2.4% and 2.3%, respectively.
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Employment: Jobs increased by a healthy 227,000 in November 2024, representing a sizable increase compared with October’s 36,000 gain the previous month. For 2025, Apollo sees the unemployment rate edging slightly higher from 4.2% now to 4.4% by year-end.
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Consumer spending: In the most recent 3rd quarter, consumer spending increased at a healthy 3.7% annualized rate. Apollo points out that the Conference Board’s Consumer Confidence Index (which looks at things like the outlook for income, business, and labor market conditions) recently rose to 92.3. That is well ahead of a reading of 80 that signals a recession may be ahead. In addition, the future outlook (i.e., expectations part of the report) rose to a level of 111.7 in November up from 109.6 in October.
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Corporate spending: Multiple stimulus-related spending programs coming out of the Covid-19 period, along with a massive amount of capital equipment spending associated with the development and rollout of AI, have helped drive an increase in business spending in the U.S. economy over the past several quarters.
