Potential Market Surprises in Trump's 2025 Presidency: Evercore Insights

Evercore ISI strategists predict unexpected market developments in 2025 as Donald Trump begins his second term on January 20, 2025. Key insights include:

Evercore forecasts the S&P 500 could achieve a third year of 20%+ returns, driven by AI adoption and resilient valuations. The “other 490” stocks in the index may outperform the Magnificent 7 for the first time since AI tools like ChatGPT emerged.

Earnings-per-share (EPS) estimates for the S&P 500 may hold steady at $274 in 2025, supported by strong margins, stable economic growth, and moderate dollar strength. Overseas growth could further stabilize earnings.

Bond yields might deviate from the expected 4-5% range due to potential crises like the debt ceiling. This could significantly impact investor sentiment and market dynamics.

Geopolitical resolutions in Ukraine or the Middle East could send oil prices below $65 per barrel, easing inflation and enhancing U.S. fiscal flexibility.

China’s equity market may outperform in 2025 despite economic challenges. Stimulus measures and improved sentiment could drive unexpected gains, even as Trump’s tariff policies intensify pressure.

Credit market disruptions, driven by China’s growth concerns or U.S. policy uncertainty, could widen credit spreads without a recession.

Equity volatility might remain subdued, resembling 2017, as lower stock correlations and easing uncertainties favor small-cap stocks.

Lastly, Evercore highlights the slim possibility of bipartisanship in Washington to address fiscal issues. Such cooperation could elevate government bond yields and market stability.

These scenarios reflect Evercore’s belief in market resilience despite political and economic headwinds. Investors should prepare for surprises while navigating this evolving landscape.