The Future of the U.S. Stock Market: A Look Ahead to 2025

Last week, Powell’s “Good Afternoon” remarks caused quite a stir in the U.S. stock market, with the Nasdaq experiencing a day-on-day drop of over 3%. This sudden turbulence has doused the recent excitement surrounding the stock market, raising concerns among short-sellers. However, I do not view this as a signal that the U.S. stock market has peaked. On the contrary, I believe the U.S. stock market is on a continued upward trajectory into 2025.

A Quick Recap of the Past Three Years

Before diving into 2025, let’s take a brief look back at the U.S. stock market over the past three years:

• 2022: The stock market faced significant turmoil, entering bear territory due to rising inflation and interest rates.
• 2023: With inflation gradually easing, the market experienced a rapid recovery.
• 2024: The opening of a rate-cutting pathway led all three major stock indices to set new highs.

Concerns for 2025

As we consider 2025, I understand that there are several prevailing concerns regarding the U.S. stock market:

1. Global economic slowdown amid a high interest rate environment raises fears of recession.
2. Inflation remains a challenge, with unclear prospects for rate cuts.
3. Stock valuations, particularly in tech, appear excessively high, introducing withdrawal risks.

Why I Don’t Expect a Recession

Firstly, I do not believe that the U.S. is heading towards a recession. Despite the high interest rates, the overall employment market remains strong, consumer spending is robust, and AI is rapidly advancing, driving economic growth. Additionally, the Federal Reserve’s willingness to provide flexible support in response to economic needs further bolsters this outlook.

Inflation Is Under Control

Secondly, inflation has been effectively managed. Currently, both commodity and energy prices are stable, and the likelihood of encountering inflation levels akin to the 9% seen in 2022 is minimal. The market’s focus on inflation has significantly waned, and while temporary fluctuations in the stock market may arise from inflation concerns, another bear market triggered by inflation seems improbable.

Federal Reserve Policies and Market Impact

Regarding worries about the Fed’s policies, it is safe to say that the interest rate hike cycle has concluded, and a rate-cutting pathway has commenced. The market may experience some short-term declines if the Fed’s planned interest rate cuts for next year fall short of expectations. For instance, last week, when the Fed announced only two potential rate cuts for 2025, the Nasdaq plunged over 3%. While such moves could lead to additional drops, I do not anticipate a permanent impact on the stock market.

Valuation Risks in the Market

It is indeed true that many stocks in the current market showcase high valuations, which is a potential risk. However, tech companies are demonstrating strong profit capabilities, and continuous technological innovation is propelling growth. The market retains long-term confidence in growth stocks, and valuation corrections typically occur gradually. While there will be stocks whose inflated prices may face significant corrections, companies with robust fundamentals and rapid growth often justify higher valuations based on market expectations.

Investment Opportunities in 2025

In conclusion, I believe that the U.S. stock market will still present numerous promising investment opportunities in 2025. I plan to maintain a bullish stance, diligently purchasing during corrections over 10%, and aggressively investing when declines exceed 15%. Of course, I will also seize opportunities for short positions when they arise.

Trading as a Learning Experience

Lastly, I view stock trading as a perpetual learning process. Investing is a lifelong journey. Regardless of whether one earns money or gains valuable experience, it all contributes to a rich knowledge resource.

Reflecting on my investment journey, it has been filled with lessons that not only enhance my trading skills but also enrich my understanding of the market. Here’s to more profitable investments ahead! 📈💡