At this time of year, every financial company whether they are an investment company or a marketing company will be penning their predictions for 2025. A quick online search and you’ll be presented with countless predictions, each contradicting the last. But how much should we care, if at all?
Predictions of “Uncertainty”
If you remember back to this time last year, we were all thinking about 2024 as the year of the election. I remember the phrase “Geopolitical Turbulence” being the go-to as 64 countries took to the polls. After 18 months of not very much happening in terms of investment markets, and then in November 2023 markets started to rally, which coined the Santa Claus Rally, we were being warned for uncertainty in 2024. A prediction that the late surge was going to be short lived.
Someone define “uncertainty” for me because I believe nobody can predict the future. And so doesn’t that mean pretty much everything is uncertain?
2024: The Quickest review of a year you might ever see
During 2024, we’ve had the war of Russia & Ukraine rumbling on and the trouble in the Middle East; Donald Trump’s soap opera life between court trials, an attempted assassination and then winning the election; the return of the Labour Government and their much anticipated first Budget; the return of Oasis and their “dynamic ticket pricing model” scandal; the Taylor Swift tour sweeping the globe; the introduction of Breakdancing to the Olympics; another McFly member won I’m a Celebrity and a blind comedian winning Strictly Come Dancing.
How did they fare?
Every prediction was nothing but a guess. The people making these predictions had no clue what was going to happen.
The first time some tells you they know what it is going to happen, is your first sign to run for the hills.
So what happened in the investment world? Well while “experts” predicted another uncertain year where “Cash would be King” and locking in for 5% was in your best interests, a globally diversified portfolio produced double digit returns.
The UK market grew to record highs with the FTSE 100 breaching 8000, the tech sector drove the NASDAQ Composite to its record high breaching 20,000 and the S&P 500 set record highs breaching 6000.
Even Bitcoin hit its record high breaking US$100k for one Bitcoin.
So in hindsight, as ever, cash was not king. And while the year was uncertain, that didn’t mean bad for investors like you and me.
What does 2025 look like?
I’ve no idea… but the “so called experts” are now predicting another year of uncertainty.
Nobody knows what will happen and if they did, they would be very rich. They also wouldn’t bother telling you or me because then they could make more money.
But no matter where we are in life or what is happening, there will always be a reason not to invest. These experts and the media need to drive sales and so they peddle these stories to whoever will listen or read.
The only thing you should be thinking of is what is happening in your life and is in store for your future? You can drive or change your own future, but you cannot change or control global politics or macroeconomics.
Planning for 2025
If you need cash this year or in the next couple of years, keep that in the bank account. If you don’t think you need it for anything in the next 5 years’ plus, then start thinking about investing it.
Inflation will always beat cash in the long term. They use interest rates to combat inflation, and so that is one of the long term certainties we have. The others being death and taxes.
The only way you can beat inflation in the medium to long term is to invest in a diverse portfolio of assets.*
Will markets go up at some point next year? Probably. Will they go down at some point next year? Probably. It’s what they do, and they always have done. It isn’t anything new.
It is this “volatility” of going up and down which helps us all to grow our savings and pensions. And the sooner you stop fighting this and learn to accept it, the more you can get on with living your life.
We set up your financial habits of regularly saving and investing, and then you go and start doing the other things which you want to do in your financial plan. Maybe that is your trip to Australia, or hiking the Inca Trail, or buying the Tesla or building the outdoor BBQ kitchen area in your garden. Maybe you’re getting married or having a baby, or maybe you’re just looking forward to becoming grandparents and being able to hand the baby back before going home. Possibly you’ve called time on work and now you have an empty calendar and a life without the alarm clock to adjust to. Or maybe you’re just about to open the doors to your new business and can’t wait for what is to come? But what’s important is you do what you want or need to do, knowing you have a portion of cash for it, and a portion invested for funding your future.
That’s where you will make the memories for your life and let the day to day of money management take care of itself. Focus on what you can control and stop worrying about what you can’t.
And so that’s why we won’t be predicting the future for you. Investments will do what they always have done, and always will do.
If you want to start planning, the period between Christmas and New Year is a popular time for reflection and planning for your best life. We’ve created our Life Planner if you want to do it yourself but if we can help you, please get in touch and either myself or John would be very happy to talk.
* Remember: Investments can and will go down as well as up and you may not get back the original amount of your initial investment