What Will POG do in 2025 is a good question with many experts tipping a modest or greater rise. But the BIG question really should be what will equities do in 2025? Which side are you on - the majority with the bulls or the very small majority of bears?
We have the following situation:
- almost all experts are expecting further gains (see image from AFR today) and most are expecting significant gains this year especially for the USA
- investors are the most optimistic ever, and I mean in the last 100 or so years) expecting further gains in the sharemarket in 2025 investors ie the US
- euphoria in equities and crypto is at crazy levels
- investors ie US funds have the lowest allocation to cash for many years (ie they are very optimistic of further gain) and so if the market does fall they will likely sell a lot ie push prices down even more since they have little cash
- the share of the US market owned by ETFs is the greatest ever - so if there is a significant market fall investors will cash out of ETFs and the ETFs will have no choice but to sell equities pushing the market down even further
- Bitcoin is at historical highs having had exceptional returns in the last 2 years and now other crypto coins have had huge gains. Meme coins have huge gains eg one called fart coin has had a return of over 2,500% since November. There are many others like this.
- the MC of US equities makes up about 75% of the world MC at an historical
- the top 5,7 or 10 US stocks make up an historical high of the US market MC
- sock insiders are selling their stock at a very high level
- by many measure US equities and very expensive or most expensive ever - trailing PE, foreword PE, stock concentration, the dividend yield is the lowest ever for the S&P,
- euphoria from the Trump election win
But we also have:
- Warren Buffet selling huge amounts of stocks and holding I think $US325b in cash
- bond yields have increased by 1.1% for 10 year bonds since the Fed’s September rate cut the reverse of the Fed’s 1% cuts - this has never been seen since I think 1967- the 20 year and 30 year are dodgyclose to 5% and the 10 year at 4.7% - this will make the market value of bonds held by banks even lower
- Europe and China are doing poorly economically with China bond rates at historical lows even lower than Japans rates
- many areas of cracks including commercial real estate (not just in the US).
- high bond rates and CRE problems have created a situation where US banks have major losses sitting on their balance sheet and many are technically insolvent or below the regulatory required minimum solvency levels
- Inflation in the US has been rising while the Fed curs
- US unemployment has been ticking up, while job opening ps have been falling and the US data on non-farm payroll has been going in the wrong direction with data revisions that make the latest data look wrong - GDP has been stellar but data revisions are likely to cause that picture to change - eg in 2008 Q1 the GDP growth was 2.5% but due to data revisions 1 year later the GDP for Q1 2008 was revised to minus 1.1% a negative 3.6% reversal - the US current data is in my view and some experts very dodgy
And to add to the bad news we now have Howard Marks coming out with a view that markets are very frothy. He did the same just before the Dotcom bubble burst and before the GFC. See below.
(20min delay)