2025 Investor Outlook

How to Navigate the Stock and Bond Markets in the Next Year

- BY LAWRENCE STRAUSS

We asked 10 investing and economic experts for their recommendations as Donald Trump returns to power. Here's what they said.

THE BEGINNING of every new year always poses challenges to investors as they take the opportunity to reassess their strategies and portfolios.

But 2025 is especially challenging. As Donald Trump gets set to return to the White House on Jan. 20, investors anticipate a host of policy changes. Among them: tougher restrictions on immigration, fewer regulations for businesses, an extension of the 2017 tax cuts and more tariffs.

What's more, the Federal Reserve is expected to continue to cut short-term rates, and stock valuations are looking stretched, especially in faster-growing sectors like technology and communication services.

In short, there is a lot for investors to keep track of. For some perspective on this and guidance for investors, we asked 10 financial professionals to weigh in on their outlook for markets and the economy, and their recommendations for investors.

1. Beyond the magnificent

David Kostin, chief U.S. equity strategist at Goldman Sachs, expects the market gainers to broaden in 2025 after several years of dominance by the Magnificent Seven stocks-Google parent Alphabet, Amazon.com, Apple, Facebook parent Meta Platforms, Microsoft, Nvidia and Tesla.

The Magnificent Seven's performance in 2024 surpassed that of the rest of the S&P 500 by 34 percentage points, but Kostin is forecasting a much smaller difference of 7 points in 2025. The gap in earnings growth between the Magnificent Seven and the rest of the market is "compressing dramatically," he says.

While investors should still allocate some money to the Magnificent Seven stocks, Kostin says, they should be taking a look at other parts of the stock market, notably midcaps.