Investing.com -- In a note to clients released Monday, Wells Fargo (NYSE:WFC) has outlined ten market predictions for 2025, covering macroeconomic trends, market movements, technological advancements, and geopolitical developments. These insights reflect the bank's expectations for economic performance, industry shifts, and investor sentiment for the new year.
1) Wells Fargo analysts believe investors will prioritize organic growth over pricing strategies, as seen in 3Q24 earnings. In reaction, companies will scale back price increases, a subtle but positive development for controlling inflation.
2) The bank expects consensus projections for 2025 U.S. GDP growth to mid-2% by spring, mirroring the year-ago 2024 trend.
“This could help propel equities higher in 1H25, but sets up a "normal" correction in the summer,” Wells Fargo analysts Christopher Harvey and Gary Liebowitz said in a note.
3) Breakthroughs in AI are anticipated with xAI's Grok 3 and Meta (NASDAQ:META)'s Llama 4, leveraging record-breaking GPU clusters three times larger than standard setups. According to analysts, these advances could reignite the AI trade and intensify competition among tech giants for larger-scale innovations.
4) Wells Fargo predicts that Coinbase (NASDAQ:COIN) will join the S&P 500 in the first quarter of 2025, reflecting increasing investor risk tolerance and bolstering momentum-driven strategies. This milestone would highlight the growing acceptance of digital assets in mainstream markets.
5) A reduction in the 2025 U.S. budget deficit forecast, now at $1.89 trillion, is expected as stronger capital gains revenues provide an unexpected boost. This would provide “a decent contrarian tailwind for Treasuries,” analysts said.
6) Wells Fargo expects the U.S. to implement additional tariffs on Chinese imports, prompting retaliatory measures from China. While these tensions could slow progress initially, China's accommodative policies may eventually strengthen its economy.
“They ultimately aid the commodity complex causing a sharp reversal in fortunes for basic materials, which gets worse before it gets better,” analysts noted.
7) Large-cap portfolio managers are predicted to see better performance in 2025 as regulatory adjustments lead to a more balanced market, enhancing returns for those underweighted in mega-cap stocks.
8) The housing market could rebound in the second half of the year, supported by a decline in 30-year mortgage rates to 5.5%. Lower rate volatility and clearer forward guidance from the Fed are expected to bolster investor confidence.
9) Core inflation is anticipated to ease from the current 3.3%, as consumer demand moderates in the latter half of 2025. Concerns over inflationary pressures from tariffs are projected to dissipate.
10) Lastly, Wells Fargo analysts believe that momentum in Republican voter registration is likely to improve the party's chances of retaining control of Congress in 2026. Notably, Nevada's active voter registration is expected to shift in favor of Republicans for the first time since 2007.