We’re in the home stretch of 2024, which means Wall Street’s 2025 predictions are arriving faster and more furiously than Dominic Toretto when he hears somebody hurt his family.
Rather than dive into the minutiae of which stocks to buy next year, Morgan Stanley decided to think big. Global Director of Research Katy L. Huberty and equity strategist Michelle M. Weaver aggregated some of the biggest questions Morgan Stanley analysts are asking themselves about the year ahead—and some of the answers we may see in 2025.
- Could AI focus shift from infrastructure to agents and embodied AI? The AI industry is morphing faster than a T-1000 Terminator, and the focus is shifting toward applications like AI agents—something Salesforce is putting all its chips on. “We could see a shift from reactive to proactive AI systems that can act within a set of guidelines,” the Morgan Stanley team wrote. “A shift toward agentic AI would have major implications for productivity.”
- How do we allocate the energy we have and increase supply? More AI means more energy needs, and investments in energy infrastructure will continue to be crucial to meeting AI demand. “However, this is only the tip of the iceberg,” Morgan Stanley warns. “Gas capacity, hard-to-electrify industries, deflation in solar, and breakthrough battery technologies are all likely to remain key debates in 2025.”
- What do protectionist policies mean for the United States? Whether or not tariffs hurt consumers, Morgan Stanley pointed out that they could create a surge in industrial investments. “The first Trump administration provided the initial spark for reshoring, and Trump 2.0 could add fuel to the fire,” they wrote. “US re-industrialization is a multi-decade theme, which we estimate to be a $10 trillion opportunity underpinned by structural tech advancement and heightened focus on operational resiliency.”
- What do longer lifespans mean for society? The US population is rapidly aging and simultaneously living longer than ever thanks to advances in healthcare, such as new GLP-1 medications and gene editing techniques. This newfound longevity means investors will need to rethink how they go about saving for a much-longer retirement. “Historically, asset management focused on accumulation, but our analysts expect a shift to decumulation,” the team wrote.
- How will lower rates impact markets? Perhaps the biggest question of them all, lower interest rates could mean investors pour money into risk assets and fuel a further market rally. Lower rates should also spur on more merger and acquisition announcements in 2025. “With year-to-date announcements up 25% versus 2023, cyclical and structural factors support an even larger 50%Y increase in 2025, driven by the return of sponsors and large-cap deals,” the analysts wrote.
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No one has a crystal ball when it comes to investing, but keeping the themes above in mind could help guide your portfolio toward profits in 2025.—MR