Stocks to Boom for Another Year?

What Happened?

Wells Fargo’s top analyst says stocks will finish 2025 at 7,007 points.

Deutsche Bank figures it will be at 7,000 points.

So does Yardeni Research.

That’s almost 1,000 points above the current level.

But how much can we trust those forecasts?

Why it Matters

Here’s the truth: You shouldn’t trust them.

That’s not because the research teams behind them make up those numbers, they don’t.

What they do is enter a whole bunch of assumptions into a spreadsheet or software system.

And we mean a whole bunch.

Because they’re not just making a prediction about a stock index level. Their stock prediction relies on a bunch of other predictions.

In order to get to their stock index level, they need to predict where interest rates will be. But even then, it’s not that simple.

It’s not just a prediction about where interest rates will be on December 31 next year… it’s about what happened for the interest rates to get there. Not only that, it’s about what the market thinks interest rates will be in 2026.

After all, the market is ‘forward looking’. It’s always looking for the next thing.

So even if they’re right about the interest rate level at the end of next year, maybe the rate didn’t get there until later than the analyst expected. Or maybe by then the market expects rates to go higher… or lower… who knows?

And that’s just one data point.

Multiply that by hundreds, if not thousands of data points: inflation, housing starts, jobless numbers, producer price index, copper prices, immigration numbers, birth rates… and on and on and on.

If they get even one of those predictions wrong, it throws out their whole calculation.

So, the chances of the analysts getting even 10% of their forecasts right are close to zero. The chance of them getting everything right is impossible.

And yet… they could still be right about their year-end forecast!

How it Affects You

The fact is, we have the same view on all forecasts.

We read them, we try to understand them, we figure out if they make sense… and then we move on.

You should do the same. Your investment portfolio should always be constructed in such a way that you stand to benefit somewhat if the market keeps going up, but that you won’t ‘strike out’ if the market falls.

One of the best ways to do that is to have a reasonable amount invested in cash or ‘cash-like’ investments (such as bonds), have an allocation to long-term dividend payers (our favorite investment type), and then some in gold and silver, and a small balance in higher risk ideas.

But not so much in higher risk investments that it causes discomfort. Do that, and you’ll find yourself in a great position.

Could the S&P 500 be at 7,000 points by the end of next year? Sure it could. But there’s a chance it won’t. Invest accordingly, based on the potential for both happening. It isn’t as hard or contradictory as it may seem.