Bob Doll, CEO and CIO of Crossmark Global Investments, projects slower economic growth and persistent inflation for 2025.
He foresees a potential 10% market correction as equities fail to align with earnings. Doll’s insights, grounded in his 40 years of industry expertise, reflect his tenure at Crossmark, a faith-based investment firm he joined in 2021 after leading roles at Nuveen, Merrill Lynch, and OppenheimerFunds.
Predictions for 2025
Slower Growth and Rising Unemployment Economic growth will decelerate, with unemployment climbing above 4.5%, signaling challenges ahead.
Sticky Inflation
Inflation is unlikely to reach the Federal Reserve’s 2% target, forcing the Fed to cut rates less aggressively than markets might hope.
Stagnant Treasury Yields and Wider Credit Spreads
The 10-year Treasury yield is expected to remain steady, fluctuating between 4% and 5%, while credit spreads widen, reflecting increasing risk premiums.
Earnings Shortfalls
Corporate earnings will underperform consensus expectations of 14% growth, with some sectors unable to post gains.
Rising Volatility
The VIX index is projected to average near 20, marking only the third such occurrence in 14 years, as market turbulence escalates.
Market Correction and P/E Contraction
Doll anticipates a 10% market correction, driven by equity prices failing to keep pace with earnings growth. Valuations, already stretched, could contract further.
“The stock market is pricing in an optimistic scenario with high valuations,” Doll notes in his annual outlook. “Given sharp gains, frothy sentiment, and stretched valuations, the market is vulnerable to negative news or a consolidation phase early in the year.”
Outperformance of Equal-Weighted and Value Portfolios Equal-weighted strategies are poised to outperform cap-weighted ones, and value stocks may outshine growth stocks, favoring active management.
Sector Leadership Shifts
Financials, energy, and consumer staples are set to outperform healthcare, technology, and industrials as sector rotation favors defensive plays.
Legislative Developments
Congress is expected to extend the Trump-era tax cuts, reduce regulatory burdens, and take a tempered approach to tariffs and immigration policies.
Fiscal Restraint and Spending Challenges
Efforts to address fiscal deficits will make progress but fall short of achieving the $2 trillion annual savings goal.
Policy and Market Implications
Doll highlights the significant policy shifts stemming from Donald Trump’s return to the presidency and a Republican-controlled Congress. While pro-growth measures like tax cuts could buoy markets, restrictive trade and immigration policies might dampen economic momentum.
“A mix of pro-growth and disruptive policies could heighten uncertainty and market volatility,” Doll explains. “Trade and immigration risks may hurt growth, raise inflation, and compel the Fed to halt rate cuts—or even consider hikes—pushing bond yields higher and weighing on equity valuations.”
Reflecting on 2024 Predictions
Doll’s track record for 2024 was solid, with seven of his 10 forecasts proving accurate. While he misjudged the likelihood of a mild recession, he correctly predicted fewer rate cuts than Wall Street expected, underscoring his ability to read macroeconomic trends.
As advisors and RIAs plan for 2025, Doll’s analysis underscores the importance of preparing for economic challenges, market volatility, and evolving policy landscapes. Proactive asset allocation and a focus on value-driven strategies may help clients navigate the year ahead.
