What if we had a time machine that could fast-forward us to the end of 2025? You could find out what was the best-performing stock, or the winning lottery numbers, or if Taylor Swift ever released that long-awaited Reputation remake album (Anna has been waiting on that for some time btw). And what would you do with that information? Probably make money off it! I mean, if you knew the winning number of the billion-dollar lottery ticket, would you not play? I for sure would.

But alas, said time machine does not exist. So in the meantime, amateur time travelers armed with crystal balls will have to suffice. Let me start with a disclaimer: I do not claim to know the future. And the future is by its very nature, unpredictable. I mean, who had Global Pandemic on their 2020 bingo card?

Here are my three financial predictions that may shape your life in 2025.

1. AI Boom

Who could have predicted artificial intelligence would become such a disruptive force in today’s world? When Open AI introduced the world to ChatGPT in late 2022, it unleashed a world we could only imagine in a Sci-Fi movie. All of a sudden, you could talk to a machine and it could talk back! It could do complex mathematical calculations, draw pictures based on the prompts you give it, and cut time by listening to a recording of a conversation and spitting out a point-by-point summary of what you discussed. I think as consumers, we have all found a way to use AI to simplify our lives. But what about businesses? That’s where the money is. And so far, they are holding back. According to a survey conducted by the US Census Bureau, only 5% of employers are using AI to produce goods or services. In another survey of 14 countries conducted by Deloitte, an accounting firm, only 8% of company leaders say their firms have barely implemented half the AI tech they have purchased or developed in house.

The opportunity is enormous! But the big question is, has the hype outrun the technology? I believe it has. The promise of AI is real. But expectations are not matched with reality. This could put the stock market gains of those high-flying tech stocks in danger. Building AI is expensive and consumes copious amounts of power and resources. If AI continues to under deliver with businesses in 2025, expect the stock market to react accordingly.

2. Higher for Longer

I know that for a lot of you (us included), inflation was a bear, destroying our purchasing power. You saw it at the grocery store, insurance for your home and auto, and when purchasing a home. Thankfully, inflation has been going down. But just because inflation has gone down, prices are still high. The only way we go back to 2019 prices is if we have a recession…..a remedy no one wants. So here we are in 2024, praying our incomes exceed the rate of inflation.

The Federal Reserve lowered interest rates recently, but mortgage rates remain elevated. We are not seeing relief when it comes to longer-term debt. And we are seeing interest rates on short-term savings instruments (like your high-yield savings accounts) begin to slide. In 2025, the big buzz words are going to be “Higher for Longer.” I am expecting some inflation to persist next year if President-Elect Trump follows through on his promised tariffs. One estimate by the non-partisan Tax Foundation estimates the average American family could pay up to $3,000 more if Trump’s tariffs are implemented. For reference, a tariff is a tax on imported goods. And the United States imports a lot of goods from abroad, mainly China, Canada, and Mexico. My prediction is that 30 Year Mortgage Rates will not go below 6%. I know. Tough news for prospective home buyers like you and I.

3. Volatility

By now we are used to this word. After Covid, the world seemed anything but calm. From war in Ukraine, to China’s economic doldrums, to the US election…..everything seemed volatile. And while the stock market in 2024 had its ups and downs, it also hit over 50 new record highs. An impressive run. As noted before, a lot of this was driven by the AI Boom. But I predict the stock market will still perform well. The economy is in generally good shape heading into 2025. The consumer is still spending. And the prospect of an extension of the tax cuts enacted in 2017, plus less regulation on businesses, is a tailwind for economic growth. The downside? Tariffs and the crackdown on immigration. All of these things will coincide with massive fights in congress, given the Republicans slim majority in congress. As we know, the stock market does not like uncertainty. And next year will be filled with a ton of it, as the record stock market run brushes up against the reality of our country’s governing situation. So hold on to your pants, as 2025 is going to be a year I predict a lot of stock market swings, BUT with a positive finish for the year. My concern is 2026. I think we may hit a recession that year. You heard it here first!

Joy and Happiness in 2025

Hopefully this exercise has been helpful. I am a naturally optimistic person. And although we enter into 2025 with some uncertainty, I can’t help but fall back on the optimism that is embedded in our national DNA. There are so many wonderful technologies and discoveries on the horizon. I’ve even heard of some medical advances that can extend our healthy living years beyond age 100. And this could happen in the next 20 years. How crazy is that?! So while it’s not human nature to look beyond what is in front of us, it’s my job to take a long-term perspective.

So if you are feeling uncertain about your finances in 2025, do not hesitate to reach out! Let’s create a life plan that removes the stress of uncertainty and puts you in control of your future.