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Chapter Markers:
0:00 - Introduction
3:33 - Stock Market Predictions
6:02 - Interest Rate Forecasts
8:53 - Housing Market Outlook
9:20 - Oil Price Projections
10:38 - Trump Policy Impact Analysis
13:24 - Immigration Effects on Economy
15:30 - Closing Thoughts & Contact Info
Hey guys and welcome to Money Talks news, the podcast. It's a podcast that's supposed to make you richer every single time you listen to it. Let's see if it's gonna work this week. I am your host, Stacey Johnson, and today we're gonna do something that we do actually, not only are we do we do this every year, I've done this every year from
More than 20 years and that is to make predictions about the year ahead, to tell you what the consensus is for stock market interest rates, housing prices, oil prices, make my own predictions, and then tell you some things that may prevent those any of these predictions from coming true. So let's start with the stock market.
The consensus for the stock market for 2025 is it it'll go up about 10%. Now, allow me to pause here and laugh out loud.
Why? Because I've been doing this for 20 years, and guess what the prediction for the stock market is for the following year, every year for 20 years.
Yeah, it's the stock market's going to go up 10%, 8%, 10%. No one ever guesses the stock market's going to go up 26% like it has this year, nor do they predict the stock market's going to go down 30% as it has in years past. So and, and why do you think all these people who, by the way, these prognosticators on Wall Street are getting paid millions of dollars a year to make these predictions, and yet they predict the same thing? And why do you think they predict 10%?
Well, because that's what the stock market has done over the last 100 years, basically is is averaged about 10% a year with, with the dividends reinvested. So that's what these guys do. They go on TV and they say, oh, the stock market's going up 10% a year. And by the time the next year rolls around you and you realize these guys were totally wrong, you've forgotten they said it. So they get to say it again. Anyway, as usual, the consensus is that the stock market's going to go up 10%.
Um, now, how about interest rates?
Um, I'm talking to you now on December 19th, yesterday the 18th, the Federal Reserve lowered rates by a quarter point. Um, they will be doing that again a couple of times next year, although they may not be doing it as many times as once we expected. They, they, they, they, they said they hinted yesterday in their meeting that they were going to perhaps lower rates a couple of times. The consensus was that they were going to lower rates 4 times next year.
They said maybe too, but of course they also said, and this is true, uh, they said they've got to wait and see what happens. I mean, they obviously deal with what's going on, not what they think might happen. They're not going to make a commitment to doing what they're, you know, what they're going to do next year, but they, you know, they said that they think that the Fed funds rate, that's the rate that they set.
Um, will be around 3.5 to 3.75% by the end of 2025. Right now it's around 4.25%. So the, so the Fed is predicting interest rates going to go a little bit lower, but how does that translate to you? The federal funds rate is the rate at which banks borrow from one another, uh, overnight. that obviously does not affect you directly, but interest rates in general do. For example, now the 10 year.
Uh, the 10 years is a really important rate. It affects mortgages and things like that. When I say 10 year, I mean the 10 year treasury bond, uh, and that interest rate is around 4.5%, a little over that today. So when the Fed said yesterday that they weren't gonna lower rates, uh, uh, that they weren't gonna lower rates as many times as market participants expected next year, the, the longer term rates, rates they don't control, started going higher.
So now, this translates into mortgage rates. The, the 10 year treasury is a, is a bond that people look at for an indication of where mortgage rates are going, not directly tied, but indirectly tied to the 10 year.
Uh, that is expected to be, so mortgage rates are expected to be around 6.5% next year, not too far from where they are now, but actually I think they've ticked up to 7% just recently, so maybe a little bit lower next year, kind of stable, uh, maybe in the 6.4% to 7% range, so call it 6.5%. That's a consensus.
Now what about housing prices?
Um, realtor, you know, this is so stupid. I, I'm looking at, you know, consensus estimates. Realtor.com.
Realtor.com, it gives an estimate every year, and they, they give all kinds of estimates about the housing market. Uh, why do I roll my eyes at that? Because they obviously have a vested interest. They've got a dog in the fight. I don't really care what they say, to be honest with you, because they're salespeople, they're, they, of course they want housing to go up. They're never going to say housing is going down. And in fact, I remember doing a TV news story in 2010 when the market or 2009, when the, when the housing market was about to crash, crash, crash.
I mean, down 30, 40%. They called it up 10%. I mean, they're, they're just horrible. Anyway, they're not the only ones who make make predictions, thankfully. Fannie Mae, which is the largest guarantor of mortgages on the planet, a government, well, now it's, it's a quasi-governmental agency, uh, may go private, but anyway, right now it's a government agency.
Uh, and they project home prices to rise by 3.8% in 2025 and 3.6% in 2026. Again, thinking about, and that's about what housing prices did this year, by the way. And again, thinking about people making predictions.
Of course, they're gonna say 3.5%, because they're probably not gonna be too wrong. Housing prices probably aren't gonna go down, and they're probably not gonna go up a whole bunch. So, kind of like saying the stock market's gonna go up 10%, so the housing market's gonna go up 3.5%. That's the consensus. OK, oil prices.
Oil prices should stabilize around where they are now. Uh, and I mean, of course, oil, uh, directly relates to gasoline prices, but oil prices right now are around $70. Um, some say they could go as high as $90 and they're going to fluctuate during the year as they always do. So some, so basically, I'd say like unchanged would be the consensus for oil prices. Literally what I what I read was they're expected to stabilize Brent crude averaging between 70 and 90 per barrel.
And that's West Texas Intermediate crude is what we typically refer to when we're talking about oil prices. They're a little lower than Brent.
OK, now,
Let me tell you, I'm, I'm gonna make some predictions, but before I do.
Let me tell you something.
They ate worse squat.
I'll tell you why that is, because there's nobody who knows what's going to happen in the world, and there's too many variables. The, the world is a weird place and all kinds of weird things, unexpected things happen, things that nobody saw coming, black swan events, what have you. Uh, so it's, this is really a fool's game. I mean, it's really like a parlor game. Nobody knows. And if you get something right, and actually I made predictions last year and my producer Aaron, who's listening right now, told me a lot of them were correct, but that's just
Blind luck, you know, even the blind squirrel catches the finds the occasional acorn, right? So anyway, but because we're doing this, and I've done it for so long, I will continue to do it. OK, stock market, I think the stock market's not going to be that good next year, and I'll tell you why, uh, simply because of a reversion to the mean. In other words, the stock market's done so well the last two years, up over 25% both years. Uh, it's unlikely it could continue that sort of rapid growth. So I'm gonna give the stock market a return of less than 10%. I'm gonna say 5%.
And it could even be down.
Uh, I'll give you a couple of reasons why in a minute, why, why it might not go down, but, uh, anyway.
I, I think interest rates are going to be about the same. I think people were looking for much lower interest rates than we're actually going to end up having a low or higher for longer is, is the mantra on Wall Street. So we're expecting interest rates to really decline. You remember when interest rates, you could get a mortgage with 3% or 2 and 75%. Forget that. That's never going to happen again, but never is a long time, but I don't believe interest rates are ever going to go back that low again, not in my lifetime, um, which may not be that long, but anyway, I think that, uh,
I think rates are gonna be stay around where they are this year. So I'm gonna go with a consensus on this. I, I, I think that uh mortgage rates is gonna be around 6.5, uh, but I'm getting some reasons why they might, that might change.
Uh, housing prices
I, I, I think 3% is generous and and again, obviously, real estate is local, you know, so when you talk about national housing prices, it doesn't really matter in your neighborhood and anything could happen. But, but I, I think the consensus seems to be OK here, around 3% growth, and, and, but I wouldn't be surprised to see it go the other way, uh, especially in select markets. I, I think housing prices could actually go down in some markets. Oil prices.
I, I, I guess they're gonna be around $70 a barrel. That sounds reasonable to me, 70, 80. I'd like to, I, I, I own a bunch of oil stocks, so I have a dog in this fight and I'd like for him to go a little bit higher. Anyway.
Now I'm gonna tell you something that isn't normal. I've done this for 20 years.
And at least actually probably more. And I'll tell you, I think that this is the most, the weirdest of all possible times to be guessing what's going going on in the, in these financial markets. And I'll tell you why, because we've never had
Um, someone in the White House more.
Uh, I mean, that, that knows less about economics, uh, to be honest with you, I'm not giving an opinion on Donald Trump. He may be the best guy in the world, but the best politician. He won the election. He may be a great husband, but I'll tell you what, an economics professor, he is not, uh, and that, and that's just a fact. Now let me go over some things that may upset the apple cart in any number of directions. Now, before I do, the reason the stock market may continue to do well, the reason it has been doing fairly well since since Trump's election.
It is because two things are gonna happen. He's gonna further lower income taxes on corporations.
I, if I'm not mistaken, for 21% where they are now. There used to be 35%. He lowered them to 21 and now he wants to take it down to 17, I think, or something like that. Uh, and, and also more tax breaks for people, uh, normal people like us.
Uh, but when, obviously when, when you or me have to pay less taxes, then we have more money in the bank, so do corporations, the publicly traded ones, the less taxes they pay, the more money they make, the more money they make, the higher their stock prices go. So, so that would be good for corporations. Also, regulations. Trump is famous for hating regulations. Now, if you're a consumer, you might like to have some regulations to protect you, but if you're a corporation, you don't like regulations at all.
Uh, and, and that is going to make, you know, fewer, the fewer regulatory hoops corporations have to jump through, the more money that they make, and again, that translates into higher stock prices. So you would expect the stock market to do pretty well. But let me tell you about some things that could go wrong, especially because of, of proposals that Trump has made.
First, universal tariffs. He's proposed implementing a tariff of, well, 25% recently on Mexico and Canada, up to 60% on China, 20% universally with every single person who imports anything to the United States. And when I tell you he's not an economic.
Professor, let me explain what I mean by that. He has literally said over and over and over that the American taxpayer, that the American consumer does not pay tariffs, that the country that sending goods to the United States pays tariffs. This is false. This is wrong.
And, and it's elementary, it's econ 101. You send stuff here, the, the person who's importing those goods is the one who's going to pay the import tariff. just consider a tax. It's exactly the same thing as when you go to the grocery store, you pay sales tax. When you get when you buy something from China and, and it's, and there's a 60% tariff on it, you will pay 60% more for that item, just like that. It's a tax. OK, now, what happens when that, when the price of everything goes up?
It's inflation. It's, it's literally the definition of inflation. Now, it could be that none of this comes to pass, that tariffs don't come around, that, that, that he's using as a negotiating tool. That's possible, and it, and it's a good negotiating tool. I'm sure it's scaring the hell out of everybody that we deal with. Um, but if he actually does that, prices on imports will go up, and there are things that, and you know, I know people, the argument is, well, yeah, but the purpose of tariffs is to protect domestic manufacturing.
Well, but we don't make some stuff. We don't make bananas, OK? I mean, there, and, and you know, when you have tariffs on something, that gives the domestic manufacturer, let's say there is a domestic manufacturer, whatever item it is, that gives them the ability to raise prices, because you, you, you price the foreign competition out of the market and so your domestic, uh, the, the domestic company can raise prices. Again, inflationary.
Also, again, maybe it doesn't happen. I don't know, I can't say. But these are the types of things. These are huge things that I never had to consider making, making, um, predictions in the past. Uh, OK, another one, the the tax cuts. Obviously, who doesn't want lower taxes? Yes, I want corporations to be more profitable. I own a bunch of stock. Yes, I want Stacy to be more profitable, not pay as much income tax. But what happens when that occurs? What happens when that occurs is unless there is a commensurate reduction in government spending.
What happens is that the deficit gets bigger. What happens when the deficit gets bigger? Uncle Sam has to borrow more money. That crowds, that crowds private borrowers out of the market, which forces interest rates higher. Uh, higher interest rates also creates inflation.
So and obviously makes everyone's life more difficult and could even lead to recession.
OK, now, um, another thing he has said, I don't know whether he has any intention of actually doing this, uh, he, he wants to have some input to where interest rates go right now, the Federal Reserve, who, who is the arbiter of interest rates, uh, is an independent agency. They, they don't pay any attention to politics, and there's a reason for that because obviously if you're right, if you're the president of the United States, you want interest rates to be low because that's gonna make people like you, but it may not be the best thing for the economy.
And he is, he's implied that he may want to interfere with the, with Federal Reserve policy. If, if he does do that, again, this is Econ 101, folks. Now you can say you're gonna do something, uh, and you, you can jaw bone and you can say, well, if you don't do this, I'm gonna come over there and do it myself. You can, you can do stuff like that and maybe get what you want. But if you actually interfere with, with an agency that's supposed to be independent, one that's important is the Federal Reserve, that's bad news. What about immigration?
All well and good. No one should be in our country without permission. That's crazy, of course. But if you take 8 million people or have whatever, whatever number you want to use, and you take them out of the country and you do it all at once, well, what's gonna happen? What do you think, what do you think that's gonna do to prices?
People, you know, agriculture, uh, construction, these are industries that that employ a lot of migrants, legal or otherwise, and if you send all those people back, then those jobs will either go unfilled or they'll be filled with people who get paid more money. That, I mean, that's why they're hiring people that are illegal, right? Because they work for less money. Well, if they work, you know, if you hire people to pay, get paid more money, then what happens? Inflation happens, the price of houses go up, the price of farm products go up.
Uh, so, you know, this could also upset the apple cart. Uh, and then finally, you know, wrapping this all at a bow.
It's just inflation in general. I mean, you know, some of the policies that that Trump has laid out, and again, these are just policies, not even, he's not even in the White House yet, but if he was able to follow through on those, there are radical policies that could increase prices, could cause inflation, and inflation could cause a recession.
Now, I'm not trying to be a naysayer. I like I said, I don't want to keep saying this over and over. I don't know if these things are going to come to pass, but I can tell you this in more than 20 years of forecasting this stuff, I've never had giant things like this to consider, things that could really change everything. So in summary, and I guess we're out of time, in summary,
The, the outlook looks good. I mean, because lower, less regulation, lower income taxes, animal spirits, I mean, you know, there's the stock market's been going up, it's been going crazy. uh, and, and so these are all good things. But could they be, could they be turned around? Could we go the other direction based on some of the things I laid out here? I think we could. I think it's scary, you know, frankly, you'd have a guy in the White House who, like I said, maybe the best man in the world.
But he didn't know economics. He said things that are just flat out wrong. So we'll just have to wait and see what happens, but that's my two cents. Let me know you are so you can contact me anytime. Just hello at Moneytalksnews.com. Uh, if you're watching this on YouTube, you can leave a comment underneath. Uh, and, and you can reach, you can reach me any number of ways. Go to MoneytalksNews.com, sign up for our newsletter, look for us on Instagram, look for us on X, look for us, uh, you know, at YouTube, which is where this video is gonna live.
Uh, and stay in touch with us. Let me know what you think. What are your predictions for the next year? And maybe we'll get together right here this time next year, and we'll see who is right. You guys have a great day. I'm gonna see you right here next time.