2025 Economic Outlook is Bullish, Trump Factor Looms

Equity markets might look rich and frothy after a multi-year bull market run—driven largely by a handful of tech stocks—but that’s no reason the good times can’t continue into 2025.

That's the consensus of a panel of experts participating in the etf.com Economic Outlook 2025 webinar this week. The year ahead will likely see some new economic and market drivers, they said, but the upward march is expected to continue.

“We’re starting to see a more speculative nature to this rally,” said Jay Woods, chief global strategist at Freedom Capital Markets.

“Right now, we’re in a no-landing phase, and I do not see a recession,” he added. “If we can keep at this level and fly the plane without landing it here, we should be OK for the next two quarters.”

Kristy Akullian, BlackRock’s head of iShares investment strategy, also sees continued economic strength and doesn't see a recession in the cards. “As a result, there’s not a need for the [Federal Reserve] to cut much more,” she said.

Nick Kalivas, head of Factor and Core Equity Product Strategy at Invesco, also sees the Federal Reserve as being less aggressive on rate cuts going forward.

“There’s not a lot of room for the Fed to move from here, but the wild cards are how effective [President-elect] Donald Trump will be in downsizing government and eliminating waste,” he said. “These things have to play themselves out and I think the Fed will be somewhat reactionary, but the growth outlook still looks fairly constructive.”

Economic Outlook 2025: The Trump Trade

The November re-election of Donald Trump provided an initial boost to the financial markets, but the panelists suggested many of his policies will need to be navigated by investors and financial advisors in 2025.

“We’re seeing the Trump factor right now out of the gate with crypto, and that story will continue,” said Woods. “Financials will continue to be a Trump theme.”

Woods cited the stock market performance of the first year of Trump’s first term in 2017 that had the S&P 500 Index up every month without any one-day drawdowns of 2% or more.

“But this is Trump 2.0, and it could be different,” he added.

Akullian said that she was surprised by “how much the market reaction post-election has mimicked 2016” when Trump won his first election.

“There’s a different economic backdrop now, rates are higher and the deficit is higher,” she said. “Looking at Trump’s policies, he’s got the good and the bad; there’s deregulation on one side, and tariffs and immigration on the other side.”

With that in mind, Akullian said that the “2025 portfolio is about being able to be dynamic and nimble.”

For Kalivas, the uncertainty is around Trump’s proposed deregulation and increased domestic energy production.

“I see a great amount of uncertainty when it comes to traditional energy,” he said, while also warning of concentration risk in investor portfolios. “Investors face the risk of putting too much risk in their portfolios. Some clients are trying to manage that through equal weight indexes, and when concentration goes down that tends to be good for small-sized value and the broader market.”

In terms of valuations even after two years of strong bull markets, Woods said, “We don’t have things trading at ridiculous multiples now.”

“We’re seeing accelerated earnings growth, and from a historical perspective, the price-to-earnings ratios are OK,” he added.

Akullian described the multiples for equities as in line with a more growth-heavy market.

“If you look at the composition of the S&P 500, it is much more skewed to growth stocks than to value, and growth stocks always trade at higher multiples than value stocks,” she said. “We’re not overly concerned about valuations; valuations are also not a great tactical model about when to trade in and out of things.”