Are we in an historic mega cycle for growth?
While February traditionally represents a seasonally weak month, we remain positive on the U.S. equity market. The Bucking Bull has carried over into 2025, but just as the five corrections last year resolved and moved markets to record highs, we expect the same this year. We maintain that we are in a secular bull market that should last until the end of this decade, driven by innovation in artificial intelligence (AI), robotics, blockchain, Web 3.0, and virtual reality. Over $300 billion is expected to be invested in AI alone in 2025.
We believe the primary driver of the U.S. economy and markets for the rest of the 2020s will be these new innovations that are emerging and being adopted at an unprecedented pace. Just as the combination of widespread adoption of computers by the late 1980s and early 1990s enabled the introduction of the internet to transform the global economy, markets, and social structures, we believe the introduction of these new technologies will again transform the global economy, markets, and social structures. This process has only just begun as we have reached the middle year of this decade.
Our target for the S&P 500 in 2025 remains 7200–7400, and before the decade ends, we expect to see the S&P 500 reach 10,000–13,000. If we are correct, leaps in productivity should make for increases in returns to capital leading to a robust earnings cycle.
The risks to our outlook are (1) inflation begins to sustainably rise and the Federal Reserve (Fed) switches course and raises interest rates or (2) there are tariffs implemented that severely restrict economic growth and cause inflation.
February 2025