an answer to a reader’s question
I think 2025 will be a tricky year.
For the US, a lot will depend on policy from Washington. Most of what Trump has promised to do during his campaign is damaging to the overall economy–and therefore bad for stocks. Hard to know, though, what he really intends or how close to Biden he is in cognitive decline.
As far as oil and gas are concerned, my guess is that we’re at peak usage now–both because of EVs (oil) and climate change (natural gas). I can’t see any strong reason either for prices to rise or volumes produced to go up. So I’m happy not to own anything in this sector.
Electric utilities have been in decline for almost all the 40+ years I’ve been in the stock market. Recently, though, AI has been prompting a revival. Utilities are weird beasts but I think they’ll be good next year. Since they’re typically income vehicles, they are typically very defensive.
What we call industrials are mostly companies that produce big ticket items for consumers. They do well when consumer spending is high. Even more so, materials do best in a very strong economy. Most of Trump’s stated economic policy is anti-growth. Unclear whether he knows this or not. And we do know that, even before his pandemic denial, the economy was ho-hum ex the (much needed) corporate tax rate cut. I find it hard to figure what will actually happen, but I don’t see a lot of reason to bet that the domestic economy is going to be strong enough for Industrials to do well. For Materials, the world as a whole has got to be humming along at a high rate to lift demand for metals and industrial raw materials.