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Fisher Investments 2025 forecast.

S&P500 total return YTD is almost 28%. Last year's (2023) total return was 22.3%. That's about 55% return in 2 years.

I have been mulling over whether to take my 2024 gain and protect it by moving it to T-bills.
This just came across my desk:

http://click.email.fisherinvestments.com/?qs=c9a0a...

"Right now we see three similarly likely 2025 market outcomes, no others and no valid basis to rank them.

"There is about a 30% probability stocks finish up with another 20%-plus return.
There is also about a 30% probability they finish down a little, maybe -7% or so.
And finally, similar chances of low single digit gains, like 4%.

"A basic rule of successful investing is: IF YOU DON’T HAVE A GOOD REASON TO BE BEARISH, YOU SHOULD BE BULLISH. Why? Because stocks rise two-thirds of the time … that is “2-1” in frequency of days, months and years in history."

"There is about a 30% probability stocks finish up with another 20%-plus return.
There is also about a 30% probability they finish down a little, maybe -7% or so.
And finally, similar chances of low single digit gains, like 4%.

That's a long way of saying "we know nothing, but we want to sound clever and precise saying it".

Elan

What Fisher Investments is saying is that they see zero chance that the S&P 500 will end 2025 with a return less than 7%. They're forecasting a range of -7% to 20+% next year. So they are actually mildly to strongly bullish. They are sticking their neck out and saying that they are not in the category of bears who see the index delivering a negative return of -10% or less when 2025 ends.

Paul Tudor Jones is a billionaire hedge fund manager who made his money over decades of successful investing. PTJ is famous for using the 200-day moving average of the S&P 500 to make his buy/sell decisions.

See https://www.trendfollowing.com/paul-tudor-jones/

Fisher Investments agrees with PTJ. Since the S&P is currently above its 200-dma, they see no reason to be bearish.

Here's my advice. If you are in your wealth building years, have a 401K plan and a job, and have not yet hit your retirement number, ignore all market forecasts. If an army of Ivy League finance grads at Goldman Sachs with petaflops of computing power can't predict the market, what makes you think any other market guru knows anything? Keep dollar cost averaging into an S&P 500 index ETF in your 401K plan using automated deductions from your paycheck every month.

And, as rayvt said, RSP is a) NOT offered as an investment option in your 401K, and b) it's badly trailed the S&P 500 over the past 10 years. You don't need it.

Fisher Investments agrees with PTJ. Since the S&P is currently above its 200-dma, they see no reason to be bearish.

I wrote this a few days after I wrote a related post on another board (related post is below), after thinking about Jim saying that he moved a large amount of money from BRK to T-bills with the plan to move it back into BRK after BRK crashed (presumably in the next year or two).

I go back and forth about whether to take some profits off the table or stay invested.

So now I have two different takes from people I respect the opinions of.

I am currently leaning toward this: "IF YOU DON’T HAVE A GOOD REASON TO BE BEARISH, YOU SHOULD BE BULLISH."
Right now my indicators are not signaling to be bearish.

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{ I don't know which is the best board to post this. }


So...a bear market will come sooner or later. When it does, Berkshire will probably become very attractively valued for a while. At that point I dump my T-bills and once again back up the truck.


I have looked at how much my investments have grown in 2024, and am having thoughts about what to do going forward. The S&P500 total return YTD is almost 28%.
A $1M portfolio gained about $280,000. That's a lot to leave invested when valuations are so high and there is a bit of political uncertainty.

If Jim says that he has moved a lot out of stocks and into T-bills, maybe it would be a Good Thing™ to take that entire 2024 gain and put it into T-bills. It sure would be nice to protect that gain.

Last year's (2023) total return was 22.3%. That's, um, about 55% return in 2 years.

FWIW, the T-Bill TR YTD is +5.2% (TBIL), 3 mo Tbills
XBIL, (6 mo) is 4.9%
SHY (1-3 yr treasuries) YTD is 3.65%

I'd hate to get 4%-5% when stocks get 25%, but would hate it even more to get -15% in stocks and lose a big part of that huge gain.

As the saying goes "....pigs get slaughtered."

I am currently leaning toward this: "IF YOU DON’T HAVE A GOOD REASON TO BE BEARISH, YOU SHOULD BE BULLISH."

My thoughts exactly. SPY is currently trading above both its 200-day and 50-day moving averages. I'm retired. I'll reduce my exposure to the market if it falls below the 30-week or 40-week moving average.

I'd hate to get 4%-5% when stocks get 25%, but would hate it even more to get -15% in stocks and lose a big part of that huge gain.

You need some exposure to the market to combat inflation, which is a killer that will erode your purchasing power over the coming years. A 60:40 portfolio is designed to do that. The 60:40 has been analyzed to death and Monte-Carlo-simulated to death by retirement advisors. The 60% ratio that is in an index ETF can be lowered as the years progress within your retirement lifespan. To be safe, you should assume that a withdrawal rate of 3.5% to 4% of your total liquid assets plus social security will meet your annual living expenses.

What Fisher Investments is saying is that they see zero chance that the S&P 500 will end 2025 with a return less than 7%.

Nowhere does he say that. In fact, he says that he's describing points on a normal distribution curve, which means he assumes there is a non-zero probability of a lower return.
Also note the headline of the article - "I'm way beyond confused". He's telling you right there that he's at the very least very inconfident about what he's telling you.

Elan

A 60:40 portfolio is designed to do that. The 60:40 has been analyzed to death and Monte-Carlo-simulated to death by retirement advisors.

With one health warning: most of the backtest era they're looking at had (a) much higher real bond yields (and equity earnings yields) than are currently available, and (b) covered time intervals of bond yields falling hugely on trend (and equity valuations rising on trend). Even if you beat a data set to death, if you're using data from situations that don't even vaguely resemble the current one, the predictions you get are not going to be useful.

Better to start with the basics: The most obvious conclusion from history is that long term returns from bonds are lower than those from equities.

A logical corollary: The only time you want any bonds at all is when the current relative pricing is such that it's one of the rare times that the prospect for bonds is higher. I bought some bunds in 2000 when that was true. This may be another such time, though my fixed income is very short duration.

The best single predictor of bond returns is the real yield on purchase date. Ten year US government bonds are yielding about 4.7% and USD monetary inflation is running around 2.4%, so that's a guess of forward real return of inflation + 2.3%/year. Five year TIPS are paying over 2%. Both are poor but positive. Still, it's a little more than I personally expect from the S&P 500 in the next 5-10 years, which is in the vicinity of the current dividend yield (i.e., index rising no more than inflation)

Jim

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