Why I'm Expecting A 20% Gain In 2025

Group 1: Market Reactions to Tariff News - The initial announcement of a tariff plan on April 2 led to significant market declines, with the Dow down 13.9%, S&P down 17.8%, and Nasdaq down 23.4% at their worst [1][3] - Following a 90-day pause on reciprocal tariffs (excluding China) announced on April 9, the S&P experienced its largest one-day gain in over 15 years, rising by 9.52% [2] - Major indexes have since rebounded significantly, with the Dow up 15.6%, S&P up 22.3%, and Nasdaq up 28.9% from their lows on April 7 [3] Group 2: Trade Agreements - The U.S. and U.K. signed a trade deal that removed auto, steel, and aluminum tariffs on the U.K., while maintaining a 10% base tariff on the U.K. and some existing tariffs from the U.K. on the U.S. [4] - An agreement between the U.S. and China included a 90-day pause on escalated tariffs, with the U.S. reducing tariffs on China from 145% to 30%, and China reducing theirs from 125% to 10% [5][6] Group 3: Economic Indicators and Earnings Outlook - Recent inflation reports indicate progress towards the Federal Reserve's 2% target, with core inflation at 2.8% year-over-year, down from 3.1% [23][24] - The earnings outlook remains positive, with Q1'25 S&P earnings expected to increase by 12.2%, and forecasts for Q2, Q3, and Q4 at 5.9%, 5.1%, and 6.3% respectively [28] Group 4: Historical Market Trends - Historical data shows that pullbacks and corrections are common, with pullbacks occurring 3-4 times a year and corrections about once a year [8] - The S&P has historically shown gains following significant declines in March, with an average gain of 5.92% in April after being down by 3% or more [12][13] - The S&P 500 saw back-to-back annual gains of over 20% in 2022 and 2023, a rare occurrence that could indicate continued growth [16] Group 5: Investment Strategies - Stocks with a Zacks Rank 1 Strong Buy have outperformed the market in 29 of the last 37 years, with an average annual return exceeding 24% [30] - Proven strategies such as focusing on stocks making new highs and small-cap growth stocks have historically yielded significant returns, with average annual returns of 37.6% and 44.3% respectively [35][36]