The stock market rally showed no signs of slowing down last month, but investors may want to keep their expectations in check as the calendar turns over to 2025. The Dow Jones Industrial Average and S & P 500 each finished November at record highs, gaining 7.5% and 5.7%, respectively, in the month. The Nasdaq Composite climbed 6.2% in November, its best month since May. .DJI 1M mountain The Dow was the best performing major average in November. For the year, the Nasdaq leads the way with a 28% gain, while the S & P 500 is higher by 26.5% and the Dow is up about 19.2%. The rally this year has come despite the fact that, 12 months ago, there were widespread worries on Wall Street of an impending economic slowdown. But Deutsche Bank macro strategist Henry Allen said in a note to clients out Monday that the market won’t have the benefit of low expectations in 2025. Economists expect 2.1% economic growth next year for the U.S., up from a 1.2% expectation heading into 2025, Allen said, citing Bloomberg data. “With growth repeatedly surprising on the upside, that’s raised expectations,” Allen said. “So getting another outperformance won’t be as simple as avoiding a recession any more. Moreover, with rate cuts and subdued inflation already priced in, these aren’t going to act as positive catalysts in and of themselves.” “And with valuations now increasingly elevated across several asset class, that makes the scope for further gains more limited. As such, getting another outperformance like we saw in 2023 or 2024 is going to be a lot harder in 2025,” he said. In addition to the raised expectations, history suggests that the stock market continuing a steady climb for a third year is unlikely. “As it stands, the S & P 500 is already up 20% in consecutive back-to-back years, and the only time it’s managed a third gain like that was during the dot com bubble” in the late 1990s, Allen said.
