Ten Predictions for 2025

We are pleased to share what has become a favorite research tradition here at Wavelength: predictions for the new year from our CIO, Andrew Dassori.

2024 proved to be a year of transition where the geopolitical landscape shifted substantially – through both elections and conflicts – and many paths for policy also reversed course. With all the moving pieces, forecasting the future was a challenge, and our predictions from last year had both hits and misses.

We were correct in predicting that growth would moderate, but the extent of this was minimal, and our call for fixed income was on target – until it was upended by fear around the election’s policy impact. All in all, predicting that Oppenheimer would win Best Picture was probably our best call, but there isn't much of an investment case to be made around that.

With this backdrop, we recognize that we can’t predict everything, and we recommend that investors hedge when they have less than a 50% chance of being correct and invest where they have a clear, repeatable edge. For considerations outside of the investment process, our predictions for 2025 are listed below. We wish you great health, happiness, and luck in the year ahead.

1. Output Growth will remain strong in the US despite mixed labor market signals.
   In 2024, the US economy showed remarkable resilience in the face of higher interest rates and ongoing geopolitical conflicts. With policy support on the horizon from decreased regulation and lower tax rates, growth is on track to remain strong in the coming year barring unforeseen shocks from conflicts, financial stress or policy errors. The labor market has offered more of a mixed picture, however, after significant downward revisions and conflicting signals across datasets. In this context, a softening employment situation will create concerns despite productivity increases and solid output for the economy.
2. Bonds will outperform cash.
   This prediction played out when we made it for 2023, and it rings even more true now that the yield on the Barclays Aggregate Bond Index has risen above the Fed Funds rate for the first time since 2022. Despite higher government deficits, overall borrowing in the economy is about average – keeping the supply side of the equation stable while real money demand is on the rise. Given these dynamics, we expect investors to powerfully shift back into bonds as money market yields evaporate.
3. Mergers and acquisitions will rebound.
   After a record number of transactions in 2021, M&A activity has since cooled amid higher interest rates and the threat of increased scrutiny from regulators. With Lina Khan set to leave her post atop the Federal Trade Commission and interest rates now falling, a backlog of tabled deals will be released from their holding pattern to generate a boom in corporate transactions.
4. The rewiring of supply chains will accelerate.
   Tariffs are set to supercharge incentives for onshoring production, but this will also happen due to rising geopolitical tensions and the lingering fear of resurgent issues experienced through the pandemic. Among the promises made during the campaign – particularly after intelligence breaches at the Treasury department and elsewhere – bringing strategic industries closer to home is likely to be prioritized as the seeds of deglobalization take root.
5. Chapell Roan will win the Grammy for Best New Artist.
   I could be biased given how often Chapell Roan’s music is played by my daughters, but when you consider her crowd from three years ago versus how it looked at the most recent Governors Ball, it's hard not to appreciate her story.
6. Businesses will welcome a new class of employee agents.
   Evan Ratliff’s podcast Shell Game – where he creates his own AI-driven voice agent to test the capabilities of generative AI – shows how, in many ways, the future people are forecasting is already here. With this, businesses will recognize the potential to profit through the increased productivity of employees supported by their own agents at work.
7. Nuclear power will stage a comeback.
   Google's deal with Kairos Power was a sign of things to come in a world where AI has created an insatiable demand for energy. Small modular reactors will be increasingly touted as the energy source of the future, and established companies will make significant investments in the space that support their increasingly critical need for energy to compete on the next frontier of technology.
8. The Buffalo Bills will win their first ever Super Bowl.
   At 15-1, the reigning champion Chiefs are the current front runner, but throughout the history of the NFL, no team has ever achieved a Super Bowl three-peat. Kansas City will have to contend with another juggernaut (who they narrowly beat in last year’s conference championship) on their path to the big game, and this year the Buffalo Bills will outplay a tired Chiefs roster and make it to the Super Bowl where, after decades of tough losses, Josh Allen will lead his team to their first ever Lombardi trophy.
9. Time Magazine’s Person of the Year will not be human.
   While there are sure to be plenty of worthy candidates who make significant contributions to society in the coming year, it will be hard for them to compete against the artificially intelligent systems that are changing our world.
10. Uncertainty will create opportunities.
    It feels like strategist outlooks almost always include caveats about uncertainty. These serve as a useful disclaimer around any forecast, and with oncoming policy changes set to disrupt trade relationships, government spending, and geopolitics, 2025 carries an expansive range of potential outcomes for markets and the economy. With that being said, uncertainty is a necessary condition for those seeking to capitalize on the mispricings it creates – from this perspective, we expect a particularly deep and wide set of opportunities for investors in the year ahead.

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