Crossmark’s Doll Projects Fewer Tailwinds and More ‘Tail Risks’ in 2025

Bob Doll

Crossmark Global Investments’ chief investment officer, Bob Doll, has revealed his annual 10 market predictions for 2025, which include: slowing economic growth, inflation remaining sticky and credit spreads widening.

Reviewing 2024, Doll said that last year saw strong consumer spending, a resilient early labor market and upbeat economic data, all of which contributed to boosting equities. However, a mid-year labor market slowdown led the Fed to cut interest rates by 50 basis points in September to prevent rising unemployment. While equity gains were driven by earnings growth and mega-cap tech performance, labor market trends for the full year suggest a soft landing is not yet guaranteed for the U.S. economy, he concluded.

In his 2024 forecast, Doll stated that central banks were aiming to prevent a crash or recession, a “Goldilocks” scenario—neither too hot nor too cold—with expectations of a gentle economic landing. However, in the 2025 forecast, Doll asserted that “Goldilocks remains a fairytale.”

“The financial and geopolitical world changed on November 5 with [Donald] Trump’s election victory and Republican sweep in Congress,” Doll wrote. “The outlook is now far from business as usual, opening up a wide range of outcomes for the global economy and financial markets.”

According to Doll, investors are benefiting from the bull market but remain cautious about high valuations. Policy uncertainty is elevated, driven by the simultaneous implementation of numerous policy changes. President-elect Donald Trump’s agenda combines economically supportive measures, like tax cuts and deregulation, with potentially disruptive actions, such as tariffs and deportation.

“It is with this backdrop that we proceed as usual with fear and trepidation (and hopefully some good, educated guesses) to unveil our prognostications for 2025 in the form of 10 predictions,” Doll wrote.

Doll’s 10 predictions:

• Economic growth slows as the unemployment rate rises past 4.5%;
• Inflation remains sticky, fails to reach the Fed’s 2% target and causes the fed funds rate to once again fall less than expected by markets;
• Treasury 10-year yields trade primarily between 4% and 5% as credit spreads widen;
• Earnings fail to achieve consensus a) 14% growth and b) every sector seeing increased earnings;
• Equity volatility rises (VIX average approaches 20 for only the third time in 14 years);
• Stocks experience a 10% correction as stocks fail to keep up with earnings (i.e., P/Es contract);
• Equal-weighted portfolios beat cap-weighted portfolios (average managers beat indexes), and value beats growth;
• Financials, energy and consumer staples outperform health care, technology and industrials;
• Congress passes the Trump tax cut extension and reduces regulation, but tariffs and deportation are less than expected; and
• Department of Government Efficiency efforts make progress but fall woefully short of $2 trillion per year of savings.

Doll evaluated that seven of his 10 annual investment predictions for 2024 came true, which falls within his average of 7.0 to 7.5 correct predictions.