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Through the end of November, the S&P 500 posted a 28% year-to-date gain. Bitcoin, the largest cryptocurrency, gained nearly 40% alone in the eleventh month of the year.
Given those statistics, it’d be reasonable to expect that advisors would be reserved in their assessments for stocks and crypto for 2025, but the truth is, the wealth management community is bullish on what the new year could bring for risk assets. Consider the findings in the recently released InspereX Pulse 2025 Outlook Survey.
“The majority (69%) of advisors believe equities will be the top performing asset class in 2025 followed at a great distance by cryptocurrencies (11%),” according to the survey.
Owing to this year’s jaw-dropping ascent by bitcoin and some other digital currencies, it’s reasonable to expect that the asset class may be in for 2025 gains that aren’t close to mirroring what was seen this year. It’s possible bitcoin and friends could even succumb to some lethargy, but assuming advisors are validated in their views on stocks, 2025 could be an exciting year for advisors and investors.
Stocks Could Gain, But It Won’t Be Easy
There are moving parts, including Federal Reserve policy, the specter of tariffs, extension of tax cuts, and more, but advisors are constructive on equities heading into 2025. Two-thirds of advisors surveyed by Insperex expect the S&P 500 to rise 10% next year and another 16% see the benchmark domestic stock gauge rising 20% or more than amount.
Conversely, just10% expect a flat year for stocks while 7% see the S&P 500 declining 10% -- the definition of a correction. However, advisors are pragmatic and they don’t believe 2025 equity market gains will be “easy” or that markets will trend higher in straight-line fashion.
“But the bull won’t be easy to ride: 80% of advisors said they expect to see at least a correction (drop of 10%) in the S&P 500 in 2025. More specifically, 33% see a drop of 10%, 31% forecast a drop of 15%, and 16% see a bear market (down at least 20%) at some point during the year. But 20% of advisors expressed extreme confidence saying the market won’t see a downturn in 2025,” adds InspereX.
Regarding the Fed, 46% of advisors believe the central bank can achieve its objective of a soft landing and a quarter believe there will neither a hard nor soft landing. Twenty-two percent believe the soft landing has already been achieved while just 7% see a hard landing arriving.
Volatility Protection in Focus
Amid looming domestic (though limited) and global geopolitical uncertainty, among other factors, advisors are expected to deploy downside/volatility protection strategies. Nearly three-quarters of advisors surveyed by Insperex “will probably or definitely add more downside protection strategies to client portfolios in 2025..”
“Advisors are certainly bullish but many of their upside expectations are more in line with historical averages. Combine that with forecasts of high volatility with at least one correction or worse, and that means investors will need to tough out uncertainty to benefit from returns that may be harder to attain,” said Chris Mee, Managing Director of InspereX.
While many advisors are looking to mitigate risk in 2025, more than half said they’ll trim cash positions in client portfolios with comparable percentages turning to dividend stocks and structured products as avenues for generating income for clients. Fifty-eight percent told InspereX they’ll at least maintain clients’ current levels of fixed income exposure.