This year, like most new years, is beginning in stages.
There's New Year's Eve, then New Year's Day as the official kick-off.
Then the first full work week (which some of us are still adjusting to…).
And then there's the lull that really doesn't lift until after Australia Day, when the year proper starts in earnest.
But around this time, we see a plethora of '… for 2025' and '… in 2025' articles in our news feeds.
In the investing space, it's things like 'Companies to soar in 2025', 'How to invest in 2025' and 'What to expect in 2025'.
Which… are mostly nonsense.
As I've written before, no-one knows what'll happen this year… or any year.
Oh, some will guess. A very few of those might even guess correctly.
But no-one actually knows.
Frankly, those who think they know the future are either lying to you, or themselves, or both.
(Yes, it's a lie even if you believe it, George.)
See, not only is it somewhere between hard and impossible to foresee the short-term future for a given company, it's harder still to imagine how investors might react to the events that do come to pass.
And that combination is precisely what will impact on share prices over the next 12 months, with a little (or a lot) of macroeconomic impact and sentiment thrown in.
Can you guess, with any certainty, what a company will do in 2025? How its competitors will react? What will happen to sales, costs and profits? How investors will react to each, and to the sum total? How that'll be impacted by changes to economic growth, interest rates, exchange rates and unemployment? How those changes will be perceived by investors, and how those perceptions will impact their expectations for the future?
Spoiler: of course not.
So trying to guess where a share price – or an entire share market – will be in 358 days is, well, silly.
(Why do we listen? Because we crave certainty. And subconsciously, we want to believe someone might just have the answers. Fox Mulder wasn't wrong.)
But hang on… isn't that precisely what investors do when they buy shares?
Not so fast, kemo sabe.
Yes, buying shares – even index-based ETFs – requires an expectation of the future. But with a difference.
If you're truly investing (rather than speculating on short-term price movements), you're thinking 5, 10 and 20 years ahead. Over those timeframes, economies ebb and flow, and sentiment rises and falls.
Over the long term, the share price tends to roughly follow business value.
So, if you buy a quality business and pay a decent price, you won't avoid volatility, but over the long term, you should be rewarded roughly in proportion to the company's results, and the increase in its underlying value.
Time spent finding the next Woolworths Group Ltd (ASX: WOW), CSL Ltd (ASX: CSL), Commonwealth Bank of Australia (ASX: CBA), or Apple, Netflix or Microsoft, is likely far better than time spent trying to guess what people might or might not think about things that might or might not happen over the time it takes for the Earth to make one trip around the sun.
The best advice for investing in 2025? The same as it was in 2024, 2023, 2013 and 2003: Invest regularly, buy quality companies, pay a decent price, be diversified, and keep a long-term mindset.
It's not the stuff of 'Predictions for 2025' articles, is it? And yet, my money says that it's far, far more useful – and increasingly so, as your returns compound over the long term.
I will, however, make some observations for 2025 that fall into the 'prepare, don't predict' approach.
First, expect volatility. Because it's always with us, but specifically this year because we have an incoming US President who is nothing if not unpredictable.
Second, hope for rate cuts, but don't bank on them. Far better to hope for the best, but prepare for the worst, than to do the opposite. It's probable that interest rates will fall this year, and probably in the first half, but no one knows. Don't assume, and don't set up either your finances or your portfolio based on interest rate guesses.
And third, don't bet against either progress or technology. There'll be setbacks and disappointments – there always are – but humanity marches forwards, faults and all. But don't get carried away with hype, either.
By the end of the year?
Statistically, the market rises more often than it falls, so a gain is mathematically more likely than a fall. But that's neither a prediction, nor a guarantee.
I wouldn't be surprised if the ASX gains 15%. I wouldn't be surprised if it falls 15%, either.
Donald Trump might be wonderful for US shares. Or the gains of 2024 may have already anticipated his impact. He could be bad for US shares, if the hopes aren't matched by the reality, too.
For what it's worth, my investment horizon of five-plus years already takes me out past his presidential term, which hasn't even commenced.
I'm asking myself whether the companies I own, or am contemplating buying, are likely to be bigger and more profitable in 2030 than they are today. And if today's price is attractive, relative to that likely future.
The rest? It's just noise. And newspaper filler.
How do I know? Because those same experts have been wrong, regularly, in the past.
That their record is unlikely to improve in 2025 is one prediction I'm happy to make.
Fool on!
