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The only thing we can say with certainty about the stock market is that it will continue to do what it does best – twist and turn, pull off surprises, and keep us investors on the edge of our seats!
That said, making predictions is always fun. So, while each knowledge may be completely wrong, here are my top two market predictions for 2025.
Tesla stock will drop at least 40%
Tesla (NASDAQ: TSLA ) had a barnstorming 2024, with its share price rising 62.5% to $403.
According to Fortune, this helped CEO Elon Musk to finish the year over $200bn richer on paper!
Granted, some of this profit comes from the rising valuations of his other companies, including SpaceX. But Tesla was the main driver, with the pioneering electric vehicle (EV) market now back in excess of $1trn.
Apparently, Musk’s support for Donald Trump and his election victory was key. The market thinks that the incoming US government will direct regulations on autonomous vehicles (AVs), which could pave the way for the rapid rollout of Tesla’s robotaxis.
However, before this hits the road, the Trump administration is likely to eliminate $7,500 in tax credits that American consumers receive when they purchase an eligible EV. And this will hurt demand for EVs, which still make up about 79% of the company’s total revenue.
Meanwhile, the stock’s valuation has diverged from reality, trading at a forward-earnings ratio (P/E) of 117. This sky-high multiple does not reflect the challenges Tesla is facing, including weak consumer spending, a possible liquidation. of EV subsidies, and increasing competition from low-cost hybrid vehicles.
To invite a load of egg on my face at the time, I predict Tesla’s stock is down 40% this year. While that sounds amazing, it will bring it back to just $242, where it was before the November election.
I FTSE 100 up 5.7% last year, its fourth consecutive year of gains. I’m going to go out on a limb and say it makes it five in a row in 2025.
I am not alone. AJ Bell Investment Director Russ Mold thinks the index could reach 9,000 points by the end of the year, which would be an increase of about 10% from today’s level. I’m not going that far, but I think it will end in 2025 higher than it started.
What makes me think this? However, Trump’s proposed tariffs could cause inflation to rise by 2.5% in the two years following implementation, according to Bloomberg Economics.
Of course, prices are not guaranteed. But investors may be looking at this possibility and starting to get a little nervous. If so, I would expect defensive sectors and stocks to do relatively well. The FTSE 100 includes defensive giants such as AstraZeneca again GSK in health care, and Unilever again British American cigars consumer staples.
Furthermore, the blue-chip index looks less risky, trading at a low P/E ratio of 15.5 and offering a yield of 3.6%. On the contrary, i S&P 500 it is very expensive now.
Finally, with UK politics stabilizing, London may prove to be a more attractive investment destination than in previous years. Elsewhere, the political outlook is more uncertain, particularly in France and Germany.
Regardless of the economic crisis, history shows that the FTSE 100 usually rises in the year following an election.
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