2025 Predictions with Bob Doll

This faith and finance podcast is underwritten in part by Crossmark Global Investments, a faith-based firm offering values-based investing options.

They seek to help investors align their financial choices with their beliefs, ensuring their portfolio reflects what matters most. If you're wondering what the economy will do in 2025, you don't want to miss this program. Hi, I'm Rob West. Few major league hitters can bat 300 in a given season. Imagine hitting 700. That's what Bob Dahl does every year forecasting economic trends. He joins us today with his 10 predictions for 2025. And then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well, we've been looking forward to this for weeks. It's that time that Bob Dahl gives his much-awaited predictions for the new year. Bob's the chief investment officer at Crossmark Global Investments, a faith-based advisory firm that manages over $5 billion in assets. And we're delighted to say an underwriter of this program. Bob, thanks for stopping by today. My privilege, Rob. Always fun to talk about the future.

Yes, it is. And we've got your predictions for 2025 right here. But first, let's just quickly recap 2024. You hit 7 out of 10 again, isn't that right? Yes, we had an average year. That's about what our long-term average is. What we missed on, Rob, was we just were not bullish enough either on the economy or the markets. Another great year for the U.S. stock market.

It sure was. And yeah, unexpected the way it turned out. So this year, the theme you've given your predictions is fewer tailwinds, more tail risks. And I'd love for you just to unpack that overarching theme for a second. Yeah, the fewer tailwinds references the fact that earnings probably aren't going to grow as fast as they did in 2024, as well as we're starting at valuation levels that are very high.

So if I look in the rearview mirror, what's helping me get down the track less than before? The more tail risks largely reference the fact that we have a new political administration. We don't know what they're going to focus on. Is it going to be regulation, deregulation, and tax cuts? Or is it going to be deportation and tariffs?

They have very different outcomes. Yeah, and maybe a little bit of everything. It'll be certainly interesting to watch. All right, Bob, well, let's begin to unpack these.

We'll get to as many as we can today. The first prediction is that economic growth slows as the unemployment rate rises past 4.5%. That doesn't sound very good to start right out of the chute.

Tell us about it. Yeah, so look, the U.S. economy has been quite robust for some time now, and we're starting to see a slowing in lots of things, consumer ability to spend, and that largely comes from a slowing job market. To that extent, the unemployment rate will tick up some. Look, a 4.5% unemployment rate, Rob, if we end the year, that's still a low number relative to history. So nothing ominous here, just a slowing. Okay, yeah. Next up, inflation remains sticky, fails to reach the Fed's 2% target, and causes Fed funds rate to fall less than expected again.

Tell us about it. Yeah, so the Fed funds rate fell less than expected in 2024. We expect more of the same, largely because inflation's probably not going to 2%. That's been the Fed's target since this all started. Absent a recession, we don't see it getting there, so we're using the phrase inflation remains sticky, which kind of hems the Fed in from the rate cuts that we were all hoping for. Bob, we've seen some signaling there at the tail end of the year with regard to the Fed, so they're already getting out ahead of this with their narrative that you better not expect what you were expecting perhaps in most of 2024, right? Absolutely. The last Fed meeting in December certainly waved the flag that they're starting to realize inflation's not behaving and going down as fast as they'd like to see.

All right, very good. Bob, let's look at the next one, and you might need to explain this to us. Treasury 10-year yields trade primarily between three and three quarters and four and three quarters as credit spreads widen. What does that mean for the average investor? So it means that Treasury bonds move up and down a bit, but no big returns, no big negative returns. It's a trading environment, and credit spreads, of course, reference how far away corporate and high-yield bond yields come in relative to Treasuries. When that credit spread widens, it usually means the economy's slowing. If it widens a lot, we're in for a recession.

We don't see that, but they've been in the last 12 months very tight and therefore not a lot of room for maneuvering. We're talking to Bob Doll today. He's CEO and Chief Investment Officer at Crossmark Global Investments. His sought-after annual predictions are out. We've got them for you. What about earnings?

What sectors of the market are going to outperform, and could there be a meaningful correction in store for us in 2025? We'll cover that and more in the next segment. Stay with us.

We'll be right back. When you hear the phrase rich toward God, what comes to mind? Surely it doesn't mean making God rich. Is it about us becoming rich so we can give?

Or maybe it's an invitation to something much bigger. In the Rich Toward God study, Faith Fi has created a way for you to explore and reflect on a well-known biblical parable about a very rich man with a very big problem. Purchase your copy of the Rich Toward God study or place a bulk order today at faithfi.com slash shop. What's going to happen with the markets and the economy in 2025?

Well, we've got some good ideas for you. Bob Doll is here. He's CEO and Chief Investment Officer at Crossmark Global Investments. Each year, Wall Street waits for his 10 annual predictions.

It's something he's been doing for a long, long time. He's got a great track record, and so we're interested and many others are interested in what Bob has to say. We've covered a few of them already. The first three predictions around economic growth slowing, unemployment rising, inflation remaining sticky, and the Fed's fund rate falling less than expected. Also, Treasury 10-year yields with credit spreads widening are going to trade between three and three quarters and four and three quarters. Bob, we're up to number four here, and this has to do with earnings.

Tell us about it. You know, earnings growth in the United States long term, Rob, has averaged about six and a half percent per year. We've gotten spoiled in 2024 when all is said and done. It looks like the results will be about 8%. The consensus is expecting 14% growth in 2025.

That's a big number. You get those kind of numbers when you're coming off a depressed level because of a recession. So we're dubious that we can achieve that kind of growth.

And along with that, the consensus is that every one of the 11 sectors is going to have up earnings. That doesn't happen very often. So sadly, we're dubious on that one as well. Yeah, and that just sounds like a setup for disappointment, doesn't it?

It does. Well, you know, people come into the New Year, analysts, they love the companies they follow, they have confidence in them. And, you know, not everything works out perfectly, as we know.

Yeah. And that, of course, leads to volatility. And that's what you focus on in this next prediction. Yeah, we've had an environment where volatility in the stock market's been pretty low.

It's measured by what's called the VIX. That's been running in the mid-teens. Our view is we might approach 20 this year, which we don't see that all that often. 20 volatility, we'll feel it, but it's nowhere near some of the crisis environments we've been in. We think some increase in volatility because of all the uncertainty and policy changes. Bob, what caution might you share with investors who are listening today about volatility, especially coming off a relatively low volatility year, just in terms of their need to keep from reacting emotionally when we do see these swings?

Yeah, you said it, Rob. When we get the downward move, people get scared and want to get out. And then, of course, when things move up, that's when we get excited and we go in, and we should be doing just the opposite. So if you have spare cash on the sidelines, on a pullback, put a little in. And when they go down a little further, don't panic out. This is a long-term investment.

That's great advice. All right, this next prediction has to do with corrections. When we talk about corrections in the market, that's never fun. What's your prediction here? That we do have a 10% correction in 2025, largely because we have some of those earnings issues and very high valuations. Look, 10% corrections, Rob, happen almost once a year. We haven't had one for three years. So in part, we're overdue, and therefore, investors, when we get it, will say, oh, my goodness, is the world about to end? Unlikely, and use corrections to put some money to work if you have spare cash on the sidelines. Yeah, you're going to feel that, especially if you've gotten comfortable without them. But if you're prepared for it, perhaps that allows you to weather it a little better. All right, Bob, we're up to number seven.

What do you got? So the states, equal-weighted portfolios beat cap-weighted portfolios. Simply saying, the Magnificent Seven, which led in recent years, that means cap-weighted portfolios had a huge tailwind. We just think the average stock is going to do a little bit better relative to those mega-cap stocks this year, which should allow average managers that are active to beat the index funds. And coupled with that, we think value stocks, which are very cheap relative to growth, will outperform. And if so, it'll be only the second time in the last nine years, Rob. Wow.

Yeah, that's something to watch. And a lot of folks have gotten in over the last decade or so to these indexes. Bob, what are your thoughts just generally on index investing versus active management?

So there are periods when one works and there are periods when the other works, and there are reasons why that happens. I'm not saying, biased and active manager, you should have all your money active. Index funds have a role, but just because they've done so well, don't go piling into them. They've done well for a reason.

The Magnificent Seven have done so, so well. So have a balance in your portfolio like so many things. Yeah. And then as a part of this, you say value beats growth for only the second year in nine. That's, again, going back to the strength of the big tech stocks. But you're thinking we're going to see value take off this year, huh? Yeah, a broader market, let's just put it that way, because the Magnificent Seven and technology in general, the stocks have moved up a lot.

They're on the expensive side relative to other things like financial stocks. So I think just have diversification in your portfolio. All right, very good. Now, I know as a part of your predictions, Bob, you look at all of the sectors of the economy and you predict which sectors are going to outperform. What do you have for us this year? Yeah, this is a standard prediction.

It's these three beat those three. There are 11 sectors. And this year we're saying financials, energy and utilities outperform health care, technology and industrial stocks. Financials we've liked.

They're the biggest beneficiary of deregulation and are pretty cheap. Energy is a bit of a contrarian bet, but we think there's a place in the portfolio. Utilities speak to the needs for energy where A.I.

takes so much energy. We need utilities to produce that power. We think those three sectors will beat health care, technology and industrials. Interesting, though, just with all of the momentum around tech and A.I., you have tech in that sector that's going to underperform.

Yeah, we do. It's not that we can't find some tech stocks that we like. It's just the sector as a whole has very high expectations.

And as a result, very high valuations. So we wouldn't be out of tech, but we wouldn't have nearly as much as people probably had and should have had in the last two or three years. Excellent. All right. We've got two more and they both relate to the new administration that's coming in. Share this next one with us with regard to taxes and regulations.

Sure. We think that the Trump tax cut extension, which will expire at the end of calendar 25, if not dealt with, will happen, that we will have reduced regulation, that government can do a lot of that without congressional approval. But the other pieces, tariffs and deportation, there'll be some of both, but less than expected. I like to say we hope less than expected because they're not economically friendly.

All right. Yeah, certainly that one we'll keep an eye on. And that goes right into something that's got a lot of press lately, and that is Doge, the Department of Government Efficiency. I know they're going to make some waves, Bob, but what do you think at the end of the day they're going to be able to get done? You know, so the administration, starting with Donald Trump, has said we're not going to touch Medicare, Medicaid, Social Security, defense.

In fact, he wants to increase defense. And of course, we can't touch net interest expense. We've got to pay our bills. Once you get past those five items, there's only eight only, $800 billion left in the budget.

I don't know where we find $2 trillion. That's the number they're targeting. I think we'll make some progress but get nowhere near that target. Hmm, interesting. Well, it's going to be fun to watch it all play out. That's for sure. Always is.

No matter where they land. Well, it's a mixed bag, Bob, of possible economic trends. I so appreciate all the work you put into this. Tie a bow on this for us as we head into the new year. You know, predicting the future, only God in heaven knows what the future is going to look like, but we use our experience and hopefully a little bit of brainpower to try to help people get through. We'll get some right, some wrong, but I wish everybody a fantastic 2025 and always. Thank you, Bob, and thanks for your work to integrate values into the portfolios you lead there at Crossmark. All the best, my friend. God bless.

That's Bob Doll. He's chief investment officer at Crossmark Global Investments. You can read his weekly commentary when you sign up at crossmarkglobal.com. All right, your calls are next. The number, 800-525-7000. That's 800-525-7000. I'm Rob West and this is Faith and Finance.

We'll be right back. Find our community and share your expertise with clients looking for someone who shares their faith and values. Find more information at kingdomadvisors.com slash get certified. Faith and Finance is grateful for support from Soundmind Investing. If you have money in an investment account, you know, sometimes the stock market can seem like a roller coaster, but it's possible to enjoy both profit and peace of mind as a do it yourself investor, no matter what's happening in the market. A short video webinar about that is available at soundmindinvesting.org. Financial wisdom for living well, soundmindinvesting.org. So glad to have you with us today on Faith and Finance.

I'm Rob West. Hey, before we head to the phones here in our final segment, let me mention, if you have not connected with a certified kingdom advisor in your area, and you're looking for a professional financial advisor in either investments or financial planning, perhaps even estate planning, we'd recommend you connect with a CKA in your area. I would interview two or three before you make your final decision. What is a certified kingdom advisor? Well, these are 1500 now men and women across the U.S. and Canada that have met high standards and character and competence. They've had a background review, a regulatory review, a pastor and client reference submitted. They've also completed a 60-hour university-based training course and passed a proctored exam around the application of a biblical worldview to professional financial decision-making.

It's the only financial services industry accepted designation around biblically wise financial advice, and you can find a CKA in your area when you go to faithfi.com. Just click find a professional. All right, let's head to the phones.

We'll head out to Oklahoma and welcome Cindy. Go ahead. Yes, thank you so much for having me. I have just a small testimonial in my own life to share about budgeting. When our children, I had three sons, and when our children were very young, we always went to church, but we didn't ever tithe because I budgeted every week. At that time, I didn't work.

I was just raising my kids. And one day coming home from church that morning, my husband looked at me and said, we're going to start tithing. And I looked at him and I said, the budget is so tight right now. We couldn't afford to tithe.

He said, I don't care. We're going to tithe. And I didn't see it at all how we could do that. But in faith, and listening to my husband, I went ahead and began to tithe. And over just a short period of time, the budget never changed. There wasn't that 10% taken out of my weekly budget. It just was almost kind of miraculous a little bit the way the Lord worked it out.

I would put my weekly tithes to my church in my budget. And the budget stayed the same. It never went any higher. And we've tithed ever since. Now, of course, there's been times in our lives where we just were not able to, but very few times.

But I just want to say, God is so faithful and honoring to us when we honor Him. And to this day, I couldn't tell you how that happened. But I shared that with my husband. I said, it's the same amount. And I keep thinking that my math is wrong, and I'm not adding it up right. Something's got to give. It's just, I was almost a little scared. But that's the way the Lord worked in our lives through our tithing.

Cindy, that is incredible. I can't tell you how many times I've heard a story just like that, you know, crank it through your calculator, it doesn't make sense. And yet in God's economy, it does. And He's told us to do exactly what you and your husband did.

And that is trust me, and watch me work. And this is not about God being a cosmic vending machine. It's not about the prosperity gospel. It's about surrendering our lives and God's money back to Him, accepting our role as stewards, putting Him first, and then living on the rest and just watching Him work, in some cases, even miraculously.

And what you discover is what you and your husband have discovered. And that is that budgeting is not just a financial tool, but it's a spiritual discipline that aligns our use of money with our faith. It fosters growth in our lives. It fosters generosity and trust in God's provision.

It's what God has asked us to do. In obedience, you all followed that admonition of Scripture, and you've seen the result, the freedom, the joy, the amazement of watching God at work. And I'm delighted you shared that with us today. I'm confident there's someone out there today, Cindy, perhaps a lot of people who needed to hear that encouragement. So I appreciate your call today. Well, thank you so much for having me. Absolutely. Lord bless you.

Call anytime. Folks, if you have a testimony today, we'd love to hear it. You know, celebrating God's faithfulness in our lives is part of what we need to do. We see that modeled in Scripture.

We're to acknowledge God at work. And if you want to take the opportunity to do that, as you celebrate how he's been working in your financial life, call right now, 800-525-7000. We'd also love to tackle your questions on anything financial as well. Let's go to Arkansas. Hi, Al.

How can I help? Yay, Rob. Thank you so much for taking my call.

Yes, sir. We've saved money for years and had actual hard cash in the house for emergency use only. But we have no large expenses. Everything's paid for.

We're living on Social Security, whatever. I just wondered how much of that should I keep in the house? And then also, if I don't keep it in the house, but you want it to be somewhat liquid, what would be the best use of that? How much should I use that to still make a little bit of percentage rather than, you know, put the money in the coffee can in the backyard? Yes, sir.

No, it's a great question now. So here's my approach on this. There's not a right or wrong answer. But this is just one way to think about it. I like the idea of keeping two weeks worth of expenses in cash at home.

And I would do that in ideally a fireproof safe. And the idea behind that money is a temporary disruption. You know, it could be, you know, some sort of natural disaster, and you're in Arkansas, so maybe a tornado, you know, comes through and, you know, there's a temporary disruption in the flow of goods and services or something like that. Maybe there's a temporary banking outage with your particular branch. And it has to do with the kind of the technical plumbing of the banking system or something like that, that would be quickly resolved. But the idea would be that you could kind of have money on hand without having to go to an ATM or anything like that for a couple of weeks. Beyond that, I would have that in a bank, and I'd use an online savings account with an online bank linked to your brick and mortar checking account. Now, don't let the idea of an online bank scare you. It just means, you know, that they are operating by the same guidelines as any other bank. You know, they still have the FDIC insurance and the same reserve requirements and everything else. It's just that they don't have the brick and mortar operations, and they can take a lot of that savings and pass it along in the form of higher interest rates. And so, you know, you could go to bankrate.com and click on high yield savings, and you'd see today which of those banks, and I'd look for banks that are four and a half or five star rated, you know, are offering the very best interest rates with no minimum deposit and no fees. And then you could open that account online in a few minutes and then, again, link that up to your checking account so you can move money back and forth as you need to free, you know, within two or three days, typically through the ACH system. The other approach would be to contact our friends at Christian Community Credit Union at joinchristiancommunity.com if you want a banking partner that's aligned with your values and they offer some great rates. So I think all of those, you know, could be a great resource to you.

Does that make sense? Yeah, we use them for our credit card and I don't have a checking account with them yet, but yeah, I like their ministry. So I call them and talk to them. Oh, that's great. Yeah, joinchristiancommunity.com is the website and great opportunity to have world-class offerings, but make sure that you're aligned with your values. Hope that helps you, my friend. Thanks for being on the program. Lord bless you. Big thanks to my team today, Amy, Jim, Dan, Anthony, and everybody here at Faith Buy. Have a great rest of your day and come back and join us tomorrow. We'll see you then. Bye-bye. Faith and Finance is provided by Faith Buy and listeners like you.