By John Grace
Contributing Columnist
What’s next for investors in 2025, you ask? Bubbles last as long as everyone can hop on the carousel. Then the music stops — or worse, the carousel catches fire.
With the S&P 500 delivering back-to-back annual gains exceeding 20% for the first time since 1988, investors everywhere are asking, “What’s next?” According to the securities industry’s finest (or loudest) voices, the outlook is bright: a continued bull market fueled by economic growth, corporate profits, easing monetary policy and fiscal support.
Or, as Keith Lerner, co-chief investment officer at Truist, says: “The equity bull market will be sustained.”
This optimism isn’t new. Since former President Donald Trump was elected again, the S&P 500 skyrocketed on expectations of pro-growth policies — tariffs, tax cuts and deregulation. But let’s hit pause on the confetti cannon. The new year brings bullish vibes and the risk of misplaced euphoria.
Let’s revisit some timeless wisdom before lighting up another dose of hopium. Gen. George Patton famously said, “If everyone is thinking alike, then somebody isn’t thinking.”
Translation? If the herd is stampeding toward one idea, it’s time to question whether that idea is as solid as it seems.
Every parent has told their child, “Choose wisely who you follow.” Investors note that genius doesn’t run with the pack — it sees the iceberg before the ship hits it.
Here’s my theme for 2025: Discover how to survive and thrive. Because when the music stops on this market carousel, everyone has to get off. Imagine if real estate and stocks suffered 50% losses while retirees withdrew income. That’s not just a bad day — it’s the Titanic after hitting the icebergs.
No one needs to predict the exact moment disaster strikes. But savvy investors know that preparing lifeboats in advance is a non-negotiable. And these lifeboats — your exit strategies — better be seaworthy. Hope is not a strategy.
A century ago, the Roaring 20s began as a decade of wild optimism and ended in the Great Depression. Back then, the pain was primarily concentrated in the U.S.
Fast forward to today, and the world is far more interconnected. COVID showed us that we’re all breathing the same air, drinking water, and riding the same airplanes (when they’re not overbooked).
Consider China, where deflation has reared its head for the first time in two years, thanks to weak domestic demand and a housing slump. JP Morgan Research highlights that China’s financial troubles aren’t just its own; they could ripple globally.
So, savvy investors aren’t shrugging this off. They’re asking, “Is deflation coming for us too?”
Dent Research argues that China is leading a global financial bubble, particularly in real estate. According to Fortune, there were 65 to 80 million vacant homes in China in late 2023. That’s more empty apartments than you’d need to house every person in Italy. And even with a population of 1.4 billion, China can’t fill them all.
“When China’s bubble bursts, it will spread worldwide — from Australia to North America to Europe,” Harry Dent predicts. “This is the largest real estate bubble in history. But most investors won’t see it coming until it’s too late.” Dent points out that when financial bubbles burst, everything crashes — except U.S. Treasury bonds and A+ corporate bonds, which become safe havens.
If history has taught us anything, it’s that recovering from financial disasters takes longer than most lifetimes. After the Great Depression, it took the stock market 25 years to recover — assuming you didn’t sell a single share.
New York real estate? A full 40 years. Back then, life expectancy was 57, so most investors never lived to see their portfolios bounce back.
This is why you don’t want to be on an investment Titanic. Now might be the time to establish exit strategies. Ask your financial professional what they learned from 2008 and 2022 and how they might seek to reduce volatility the next time.
Remember, bubbles don’t announce themselves. The music on the carousel doesn’t give you a heads-up before it stops. So, before you find yourself scrambling for a lifeboat, ask yourself: Am I ready for what’s next?
John Grace is a registered representative with LPL Financial. His On the Money column runs monthly in The Wave. The opinions expressed here are for general information only and are not intended to provide specific advice or recommendations for any individual.
LIFTOUT
A century ago, the Roaring 20s began as a decade of wild optimism and ended in the Great Depression.