4 Stock Market Predictions for 2025 

​Between tech-fueled sell-offs, interest rate cuts and a presidential election, 2024 had its fair share of volatile market moments. But ultimately, the major indices ended the year significantly higher while setting dozens of all-time highs. The S&P 500 gained 23.31%, the Nasdaq Composite gained 28.64% and the Dow Jones Industrial Average gained 12.88%.As we move into 2025, sticky inflation, a new administration and uncertainty about everything from potential tariffs to interest rates present a lot of unanswered questions. Money asked investment professionals for their insights about the new year. Here are their stock market predictions for 2025.Lower earnings and higher interest rates could hurt returnsWith the exception of 2022’s bear market, when the S&P 500 fell by nearly 20%, the past four years have produced strong returns for investors. The benchmark index saw gains of 26.89% in 2021, 24.23% in 2023 and 23.31% in 2024.As rewarding as those gains have been, investors should prepare for tempered returns in 2025, according to Timothy Chubb, executive vice president and chief investment officer of Girard Investment Services. “I do think that earnings growth will narrow between the Magnificent Seven and the other 493 companies [in the S&P 500],” Chubb says. “We could see companies’ top lines slowing down a bit if the economy [slows], and bottom lines being challenged by higher-for-longer interest rates.”With inflation falling from a 41-year high of 9.1% in 2022 to its current 2.7%, the Federal Reserve was able to cut its benchmark federal funds rate by a total of one percentage point in 2024. But getting inflation back down to the Fed’s 2% target remains a challenge, leading to speculation that the central bank may slow down or pause its rate cuts. The CME Group’s FedWatch Tool, which gauges the probability of upcoming rate cuts, currently shows a 88.8% chance that the Fed’s rate-setting committee will hold rates steady in the 425–450 basis point range at its January meeting.Howard Chan, chief investment officer of Kurv Investment Management, says the persistence of elevated inflation means that investors will have less certainty about what will happen with interest rates in 2025. “There was a sense that the Fed had at least contained inflation and things were going in the right direction. I’m not sure the battle has been completely won,” he says.Slowing or pausing rate cuts could adversely affect interest rate-sensitive sectors, such as financials, technology and real estate, the latter of which is still struggling after the Fed hiked interest rates to their highest levels since the 2007–2008 financial crisis.Additionally, a number of President-elect Trump’s proposed policies could push inflation higher again. “Many of those policies — from tariffs [to] more stringent approaches to immigration that would restrict the workforce — would be inflationary,” Chan says. Big investment banks also think the market will grow at a slow