This marks the second year of what I’m hoping will become an annual tradition—reflecting on the macro trends of the past year and setting expectations for the next.
This exercise helps me take stock of what’s happening in the investment world and better position myself to take advantage of emerging trends and momentum.
For reference, here is last year’s post on the 2023 macro trends and 2024 outlook.
Largely speaking, 2024 was a predictable year. While there were some hiccups, there were no crises that set markets or interest rates into turmoil.
For me, reflecting on the year provides valuable insights as I prepare for what 2025 might bring.
Whether you’re into stocks, real estate, Bitcoin, or broader macro trends, understanding the bigger picture is key to staying ahead.
The Macro Trends of 2024
2024 was a year where the markets defied many expectations, proving yet again that trends can surprise even seasoned investors.
Let’s briefly touch on three key areas—stocks, interest rates, and housing—before diving deeper into predictions.
Stock Market Returns
The stock market delivered exceptional results this year.
The S&P 500 ($SPY) gained approximately 24.89%, the Nasdaq 100 ($QQQ) soared 25.58%, and even the lagging small-cap index ($IWM) posted a respectable 11.38% increase.
It was a year where large caps led the charge, driven by strong earnings and continued tech sector dominance.
The last two years have been absolutely silly for US equities, especially tech which is up nearly 95% in the last 24-months:
I’m cherry picking here a bit, as the end of 2022 we were coming off bear market lows.
Zoom out 3-years and $QQQ is up just 30%. But if you go out 5-years it’s up nearly 150%.
Still, it’s hard to ignore how strong, and effortless, the returns of the past two years have been. I’ll touch more on that later.
Interest Rates
Mortgage rates fluctuated throughout the year but ended slightly higher than where they began, hovering just above 7%.
While the Federal Reserve maintained a cautious approach, the higher-for-longer rate environment continued to shape borrowing costs and affordability.
There were a lot of emotions this year around interest rates. I always find this fascinating.
Imagine you went into a comma January 1st 2023 and woke up today. If you just glanced at where interest rates were you’d be underwhelmed with how little has changed.
In reality, it’s felt like a rollercoaster ride for the rest of us.
Housing Market
Home prices nationally were up about 4% year-over-year.
That sounds small compared to stock market gains, but most of us investors are leveraged 4-5x on our real estate holdings.
While some Sunbelt markets definitely faced challenges, many northern cities continued to show strength.
A lot of people expected home prices to crumble with higher interest rates. But with continued low inventory levels, that’s not happening.
This is why I continue to share housing market data in the weekly newsletter. It’s so important to stay unbiased and look to that data.
Looking back, 2024 could be characterized as an “easy money” year.
Trends like strong stock market gains, modest home price increases, and resilient demand were fairly easy to foresee based on last year’s signals.
However, in my opinion, the horizon for 2025 looks much less certain.
People are nervous about inflation flaring back up and interest rates staying high.
On top of that, we’ve got a new administration controlling the Presidency, House, and Senate, which makes it even tougher to predict how the next 6–12 months will play out.
I think 2025 is shaping up to be a tougher year for making money.
That said, I also believe on the other end of it will be massive opportunity. Let’s take a look at why I believe that.
Reviewing 2024 Predictions & Assessing 2025
If I had to sum up my expectations for 2025 in one word it would be: lackluster.
That said, I’m also incredibly excited about what’s to come.
I believe the US and society as a whole are entering a Golden Age of wealth creation and prosperity unlike any experienced in the past.
I’ll talk more about that toward the end. But for now let’s look at how I fared with my 2024 predictions and what I expect for 2025.
The Stock Market
Last year, I predicted continued strength in the stock market. My reasoning was simple. Momentum was on our side and we were heading into an election year.
Election years are notoriously bullish for stocks.
I also speculated that small caps had the potential to outperform in 2024. My expectation was that we’d see inflation continue to taper and the Fed cutting rates.
I nailed half of that.
Simply put, small caps failed to outperform the Nasdaq or S&P 500. Here’s a look at 2024 performance for each index:
[image chart]
Mean reversion is tricky. And trying to time it is difficult, especially on a more macro level like this.
Fortunately, I course corrected mid-year and stayed out of small caps for most of the second half.
2025 Stock Market Expectations
I believe we are at risk of seeing a down or flat year in stocks with elevated volatility.
Why do I believe this?
Again, I try not to overthink things. Quite simply, 2024 was too easy.
But beyond that, you need to consider all of the unknowns.
What will be the impacts of all the new political changes?
Are tariffs going to be heavily implemented or more of a bargaining tool to strong arm trade agreements?
If the former, will they ignite another leg higher in inflation?
These are just some of the market’s concerns. Notice I say “the market’s”.
I’m not actually concerned about these things. But it doesn’t matter what I think.
Fear and greed drive the markets, and you have to consider how the masses are thinking to understand what kind of environment we might be entering.
The reality is, going into 2024 felt extremely calm compared to entering 2025.
If I had to put a number on it I’d say the S&P 500 returns somewhere between -5% and +5% in 2025.
For some anecdotal sentiment, I’ve talked to several people that have lamented buying real estate instead of just putting their money in the stock market this year.
That screams frothy to me.
The markets have a funny way of correcting that kind of sentiment, and these same people may be opting to pile into stocks at the exact wrong time.
Bitcoin & Crypto
Last year I predicted that Bitcoin would likely see continued growth. I attributed this to institutional adoption, ETF approvals, and anticipation of the 2024 halving event.
This was, by far, my most accurate prediction.
Bitcoin absolutely crushed it in 2024. It’s hard to believe at the time I wrote last year’s article that Bitcoin ETF’s didn’t even exist yet.
Now, they are the most successful ETFs in history:
I expected Bitcoin to easily hit new all-time highs in 2024.
It opened the year at $42,288 and hit a high of $106,136. It ended the year at $93,354 for a year-to-date return of 121%.
Amazing!
2025 Bitcoin Expectations
My opinion, for now, is that the easy money in crypto has already been made. If you’re feeling that FOMO and piling in now, it could very well be a mistake.
Yes, there’s a lot of chatter about the US creating a Bitcoin strategic reserve.
Yes, we’re still very much in a bull market/uptrend for the asset class.
Yes, US states, international countries, and corporations are starting to buy and hold Bitcoin on their balance sheets.
But it all feels a bit long in the tooth to me.
That’s not to say we don’t go higher and even put in fresh all-time highs. I expect we will. But I’d be quite surprised to see similar returns to what we experienced in 2024.
Anecdotally (yes, again), I know people selling their rental properties to buy Bitcoin. Other’s are reallocating their savings and emergency funds in favor of Bitcoin.
I see a TON of this online and on X/Twitter.
People are still convinced they are “early” to this asset class.
To me, again, it feels frothy.
A large part of this bullishness comes from the expectation or belief that Bitcoin will become the world reserve currency.
And, given the rate at which the US has been creating dollars and piling on debt, it honestly isn’t an insane idea.
But given the froth I find myself considering what could go wrong.
The new administration claims to be serious about tackling our absurd government spending and US debt obligations.
It’s difficult to fathom but… what if they are successful?
It sure would take a lot of the wind out of the Bitcoin narrative.
And call me crazy, but I do think it’s possible.
While lots of people like to think that cutting government spending isn’t as easy as it seems, I disagree.
And tackling the US debt is likely best done by fostering economic growth via deregulation, lower taxes, and other strategies.
In other words, we need to grow into our debt not out of it.
Say what you want about the incoming administration, but I firmly believe they have put together a team that is capable of pulling this off. I’ll touch on this more toward the end of the post, but I’m quite excited about what’s coming.
Back to Bitcoin… I think the odds of us topping out in Q1/Q2 of 2025 are becoming increasingly high.
I don’t know what price that might be at, but I wouldn’t be surprised if most of the move is behind us.
One more push up through all-time highs could be the crescendo to the bull run.
Real Estate & Interest Rates
Last year I predicted we’d see mortgage rates settle in a historical average range. From 1971 – 2024 the average mortgage rate has been 7.7%.
We spent 2024 hovering between about 6-7%, so I was pretty accurate there.
My concern was that strong wage growth was going to keep us from seeing rates all that much lower. From last year’s article:
“If wage growth remains elevated, say at 4% or more, is it realistic to expect inflation to get to 2% or below?
I don’t think so…When people have more money they tend to spend more, pushing up prices.
And if we can’t get inflation back to 2%, one of two things (or both) will happen. The Fed will keep interest rates at a more restrictive level and they may change their inflation target, adjusting it higher than 2%.”
Here’s what wage inflation data looks like from December 2023 through November 2024:
If you average Jan – Nov 2024 you get 4.86% wage inflation for the year.
So again, is it reasonable to expect total inflation to be less than 3% if wage inflation is running far hotter than that?
No.
The good news is wage inflation seems to be trending lower. And that’s more apparent if we zoom out:
Beyond interest rates, I made 3 main predictions in this category last year.
I expected cash flow real estate to remain scarce, calling out markets like Cleveland and Memphis as “no longer working”.
I also believed that Detroit would continue to be attractive, largely because it does still work from a numbers perspective.
Finally, I expected home prices to continue grinding higher and inventory to remain at historically low levels.
All of that was pretty spot on.
What Is In Store for 2025 Real Estate & Interest Rates?
My biggest, and perhaps most contrarian, belief for 2025 is that we will see interest rates decline more than the market is anticipating.
Right now, the market is expecting a Fed Funds rate of 3.75% – 4.25% by December 2025 while the current Fed Funds rate is 4.25% – 4.50%
That means the market is expecting 1 – 2 rate cuts for all of 2025.
I am taking the over on that all day. I’d say we see 3 -4 cuts.
As noted previously, I believe a continued decline in wage inflation will be a tailwind for inflation as a whole.
Layer on top of that likely job cuts due to downsizing government and potential privatization of the US Postal Service (more on this below), and there will be more downward pressure on inflation.
The other week, people were freaking out because inflation was spiking and everyone was concerned the next leg higher was imminent.
This is the chart that is supposedly concerning:
But, as you can see, Truflation is already reporting a decent decline from 3.01% to 2.77% and when you zoom out, the picture looks even less worrisome:
I’m of the opinion that we’re at a local top here when it comes to inflation data.
We’ll likely see this trend turn here soon (if we haven’t already), and when the market wakes up to it we’ll see interest rates play catch up.
By Spring we might even start to see official inflation data confirm this and give the Fed the cover it needs to continue cutting rates.
All this to say that I believe we’ll see lower rates in 2025 but still not crazy low. Settling somewhere at 6.00% mortgage rates seems feasible.
I still believe the trend of locating strong cash flowing real estate will remain difficult. And that will continue to be a tailwind for Detroit investing.
Housing inventory is likely to continue trending higher toward more historical norms. Lower rates might help us get there as more people feel less locked into their current mortgage.
Ultimately, I believe those investing in real estate are going to be happy they stay the course in 2025.
If I’m correct in my view that the stock market will be more volatile, we’ll see the FOMO fade from real estate investors that felt like they missed out on 2024 gains.
A Political Landscape Shake Up & A New Golden Age
I am incredibly excited to see what comes of the political landscape shakeup we’ve recently experienced.
And I say that as a lifelong Democrat.
The Trump administration has appointed a younger demographic to cabinet positions with a focus on reducing government bureaucracy and a deregulation.
They also have a number of advisors for things like artificial intelligence (AI) and crypto, including Marc Andreessen and David Sacks.
All of this is badly needed.
Government has been lacking leaders that understand these industries that will undoubtedly dominate the next 5 – 10+ years.
This is especially true when it comes to AI.
And reeling in government bloat, inefficiency, and spending is an initiative that probably hasn’t been experienced in over a generation.
All of these efforts, if well executed, are going to set us up for an incredible era of prosperity. And I am over the moon contemplating what the near future will look like.
But it’s not going to come without some short-term turbulence and potential pain.
The US government employs some 3 million people. A 40% reduction in this workforce would be massive.
For comparison, Walmart is the largest private employer in the US at 1.6 million people in the States.
While a lot of people are laughing off the Department of Government Efficiency (DOGE), I believe it will be incredibly effective and impactful.
DOGE is not a joke.
I believe we’ll see a lot of this happen in the first 1 – 2 years of Trump’s presidency and it will likely create some serious turbulence in the markets.
It would also have serious downward pressure on inflation.
Furthermore, there is talk of potentially privatizing the US Postal Service (USPS) which losses $10 billion per year and employs 650,000 people outside of the 3 million government employees.
If this were to happen you can be sure that there would be mass layoffs with the USPS as a private company.
These are just a couple examples of what is coming down the pike.
There will be big changes and a lot of uncertainty.
The markets have not yet priced this in simply because we just don’t know all that will happen quiet yet.
But that will change soon. And when it does, I expect increased volatility, deflationary forces, and eventually a much stronger US government and economy.
The Sun Sets On 2024
2024 was a relatively straightforward year for investors—solid stock market gains, steady real estate trends, and Bitcoin continuing to prove its staying power.
But as we move into 2025, the landscape feels a lot less predictable. Opportunities are definitely out there, but so are some big challenges.
With a new political landscape, potential shifts in economic policies, and global trends evolving quickly, this is shaping up to be a year where adaptability is everything.
Whether it’s dealing with stock market volatility, managing expectations for Bitcoin, or finding the right real estate deals, 2025 is going to require a mix of caution and strategy.
That said, I’m still optimistic about where things are headed.
Big structural changes tend to come with some turbulence, but they also open the door to what could be a new era of massive opportunity.
As always, the best way forward is to stay informed, keep a long-term perspective, and position yourself to capitalize on trends while ignoring the noise.
Next week, I’ll dive into my specific plans, goals, and strategies for taking action in 2025.
Let’s make this year count 💪🏼