Bull or bear? What are financial advisors’ market expectations for 2025?

Most financial advisors said they expect the S&P 500 to be up 10% or more by year-end 2025, compared to where it was between November 6 and Nov.13, 2024 (a low of 5,929.04 and a high of 6,001.35), according to the InspereX Pulse 2025 Outlook Survey.

More specifically, the survey said that:

• 67% expect the S&P 500 to be up by10%.
• 14% expect the S&P 500 to be up by 20%.
• 2% expect the S&P 500 to be up more than 20%.
• 10% expect the S&P 500 to be flat.
• 7% expect the S&P 500 to finish down by 10% or more.

In addition, the majority (69%) of advisors believe equities will be the top performing asset class in 2025, followed at a great distance by cryptocurrencies (11%).

But the ride will not be easy

Although many advisors see a bull market in 2025, the bull won’t be easy to ride, the survey said. 80% of advisors said they expect to see at least a correction (drop of 10%) in the S&P 500 in 2025. More specifically, 33% see a drop of 10%, 31% forecast a drop of 15%, and 16% see a bear market (down at least 20%) at some point during the year. But 20% of advisors expressed extreme confidence in saying that the market won’t see a downturn in 2025.

Smoothing the ride

So, what are advisors planning on doing to smooth the ride? 72% said they will probably or definitely add more downside protection strategies to client portfolios in 2025.
“Advisors are certainly bullish but many of their upside expectations are more in line with historical averages.

Combine that with forecasts of high volatility with at least one correction or worse, and that means investors will need to tough out uncertainty to benefit from returns that may be harder to attain,” said Chris Mee, managing director, InspereX. “With these expectations, it makes sense that advisors are adding more downside protection to client portfolios to help alleviate the fear that comes with volatility. This way, investors can stay invested with peace of mind and remain focused on their long-term objectives.”

The Fed

How do advisors think the economy will land?

• 46% believe the Fed will eventually achieve a soft landing.
• 25% expect a no landing scenario.
• 22% believe the Fed has already achieved a soft landing.
• 7% expect a hard landing.

Action steps for 2025

“Despite the optimistic outlook for market performance in the year ahead, we found that most advisors (72%) will be adding more protection strategies to client portfolios in 2025, as the return of market volatility has been identified as a top three concern for advisors and their clients”, said Mee. Interestingly, Mee added, 52% of respondents said they would use more structured products and market-linked notes to mitigate risk and generate income in the year ahead, while 32% would use more market-linked CDs.  Further, 25% of respondents said they would use more variable annuities, and 18% said they would use more fixed annuities for income generation.

“With nearly one-third of advisors (31%) saying their clients are requesting to reduce risk in their portfolios, advisors are faced with an opportunity to demonstrate their value and expertise while positioning portfolios for 2025 and beyond,” Mee said.

InspereX is a tech-driven, fixed-income and structured products distribution and trading firm.
The InspereX Pulse 2025 Outlook Survey was conducted post-election between November 6-13, 2024, by Red Zone Marketing on behalf of InspereX. The 682 financial advisor respondents work at independent broker/dealers, RIAs, banks, regional firms and wirehouses. During the survey period, the S&P 500 high was 6001.35, the low was 5929.04 and it closed at 5985.38 on November 13.

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