ETF Investors Draw 2025 Roadmaps Amid Uncertainty

Visibility is low after two years of 25%+ market gains and the incoming Trump administration's promise of change.

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RonDay
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Contributing Editor
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Reviewed by: Paul Curcio
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Edited by: Kiran Aditham

Previewing the upcoming year is an annual media ritual, so taking note of red, yellow, and green flags on the horizon to help you decide how to nurture and protect your investments can’t be bad.

Back-to-back years of 26% growth in the S&P 500 as measured by the S&P 500 ETF Trust (SPY) are rare, and investors should rightly be deciding whether or not to keep riding the market or pull into a rest stop. Of course, the time horizon is crucial, and younger folks might wisely be counseled to keep putting money in stocks, surfing the market crests and crashes until they start feeling pain in their knees.

Wild cards are everywhere as 2025 begins, and perhaps none are wilder than the Trump card. Markets will certainly react to the implementation of any of the president-elect's campaign promises, whether it's imposing tariffs, deporting illegal immigrants, or a more permissive cryptocurrency stance. We won’t know until Jan. 20. 

To help you decide whether to hold or fold—move to bonds from stocks or buy more crypto—we asked our resident and corresponding experts for their thoughts on how to approach the new year. While we’re not advocating for specific exchange-traded funds, we are suggesting guidelines on how to face the cloudy new morning.

Avoid Predictable Irrationality 

Columnist Allan Roth, who has been offering advice for a decade at etf.com, urges investors not to cave into their immediate impulses as the year begins. Roth, founder of financial planning and investment advisory firm Wealth Logic, suggested reflecting on what happened in this century’s three bear markets: few people bought stocks and ended up missing massive market runups.

“With two years of 20%+ gains, one should be rebalancing to a target allocation between stocks and bonds,” he wrote in an email. “This means selling some of the equities and buying those unloved bonds.”

“I have no doubt, during the next bear market, I’ll be writing a piece with a title like ‘stocks are on sale so why are so few buying?’” he wrote. "I can’t predict markets but it’s easy to predict investor behavior; it’s predictably irrational."

Dump Megacaps? 

etf.com Research Lead Kent Thune, who's also an investment advisor, suggested pulling back on those big tech stocks that have fueled the market for more than a year. Thune said he believes a market correction is overdue. 

“A smart, cautious approach after two years of 25%+ gains is to pare back exposure to high-priced megacap stocks, which are the most vulnerable,” he said. “A growth-at-a-reasonable-price approach, or what advisors call 'GARP,' can be wise in the coming year.” 

Nevertheless, Good Times May Continue 

Cutting risk—or exiting equities—after two years of surging markets is tempting and might not be the best idea, said etf.com Senior Analyst Sumit Roy.

“History shows that the rally could potentially continue,” he wrote in a note. “Investors should stick with their long-term investment plan, which might include rebalancing from stocks into other asset classes like bonds (or not—every investor is different).” 

“There's a distinction between sticking with an investment plan that matches an investor's goals and risk tolerance and trying to time the market based on price movements. Investors should try to do the former and avoid the latter for best results.” 

Ron Day is Contributing Editor at etf.com. He joined the company in October 2022 and has served as Managing Editor, deputy managing editor and editor.

Ron covered business and financial news at Bloomberg News for 20 years, working on the breaking news, technology, commodities, headlines and First Word teams. He was previously senior editor at ESG news outlet Karma Impact and filled the same role at Boundless Impact. He also covered a variety of beats at New Jersey daily papers including the Daily Record in Parsippany, the North Jersey Herald & News and the Asbury Park Press. Ron's freelance work has been published in AARP.com, Investopedia.com and BigThink.com.

Ron is an advocate and fan of literacy. He hopes to one day master his Telecaster, rather than the other way around. His wonderful family includes a 10-lb. maltipoo named Emmy. 

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