Key Pillars of the Bull and Bear Cases in 2025:

 Use of the terms “bull” and “bear” in financial markets can be traced back to London’s financial district in the late 19th century, used as an analogy for how each animal attacks; the bull thrusts its horns upwards, and a bear swipes its paws downwards. Others believe the terms started in the 16th century when bearskin salesmen would sell skins they had yet to receive from trappers, hoping the price from trappers would drop. We’ll leave that debate to you. On Wall Street today, firms consider a base case, or what they believe will likely occur, and bull and bear cases of factors that could sway markets in either direction. As our base case, from LPL Research, we expect moderate gains for stocks, rangebound Treasury yields, and slight cooling in the economy.

The equity markets have been weak in the last few days, and it is no secret as to why.  Today, the Conference Board’s Consumer Confidence Index for February came in at a reading of 98.3, a significant drop from January’s revised 105 reading and short of the 102.5 reading expected by economists. This is the 3^rd consecutive month on month decline, bringing the index to the bottom of the range that has prevailed since 2022. Worries over more Trump Tariffs, stubbornly high inflation readings and increasing international competition are also concerns that weigh on investor’s minds.

The bull case stems from expected continued steady economic growth, which should enable corporate America to grow profits at or near a double-digit pace in 2025. We are more than 60% through the fourth quarter earnings season, and earnings growth for the S&P 500 is tracking to a very strong and better-than-expected 16% pace, and companies have generally offered upbeat outlooks, resulting in the normal amount of estimate cuts. Consensus analysts’ estimates for S&P 500 earnings in 2025 still imply a 13% increase even after the reduction since New Year’s (LPL Research expects something closer to 9–10% — still solid growth).

Factors driving these earnings gains include solid economic growth, massive AI investment, related increases in productivity, which boost margins, and deregulation, particularly for financial and energy companies. Tariffs will offset some of these positive earnings drivers, though to what degree is an open question.

The Equity bull market we are currently in turned two last October. Since 1950, the average bull market tends to last over five years.  LPL believes robust economic growth, fueled by business spending and hopefully moderating inflation leaves this bull with room to run.

We are in a moment in time where the bulls and bears both have credible arguments right now. LPL believes the bull case will prevail through economic growth, strong earnings, and disinflation providing a lift for equities this year.

Contact us with any investment questions.

– Mark and Elise

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All information is believed to be from reliable sources; however, LPL makes no representation as to its completeness or accuracy. This research material has been prepared by LPL Financial LLC. Tracking #701318 (Exp. 2/26).