If you want to know what’s going to happen to your investments over the next year, the best place to start is by taking note of what happened over the past year.

And the past 12 months has been very good indeed – absolutely superb for US shares and exceptionally good for Australian shares.

But don’t think a total return on the ASX for the year at more than 18 per cent is standard fare. It’s not, it’s more like twice the level you might reasonably expect.

For sharemarket investors, especially exchange-traded fund investors, the writing is on the wall. The S&P 500 has just returned 30 per cent, the Nasdaq did 37 per cent … it’s rarely been this easy to make money.

Cut to the chase. Regardless of earnings estimates or US tax cuts, we will be very lucky to get returns that are anything close to those numbers again in 2025. Also, never forget inflation is back – you need to subtract 3 per cent from your returns on asset class to be realistic in terms of your spending power.

Nevertheless, one of the smartest tenets of investing is that it’s not what you think is going to happen that matters, but what everyone else thinks.

The official “groupthink” is what we call “consensus forecasts”. As an investor you don’t need to believe these forecasts, but it is crucial that you know what they are.

Here’s what you need to know about the outlook for sharemarkets in the year ahead. To keep it simple, let’s just look at overseas markets with a special mention for gold stocks and local markets, and the listed property sector.

 

Global markets

With Wall Street now utterly dominating the global share index, what happens in the US will dictate what happens on all other listed markets next year. And before you hear the consensus forecast for Wall Street, keep one thing in mind – this time last year the pundits thought the S&P 500 would finish calendar 2024 near 4600.

As it turns out the S&P 500 has sailed above 6000. Yep, they got it wrong.

The market pundits underestimated returns and that will always be forgiven. In contrast, if the pundits overestimate returns they make longterm enemies.

Either way, we must hear them out. After all, these people are paid enormous salaries to try to guess the future. The consensus view on the outlook for the S&P 500 in 2025 is about 8 per cent and, if you add 2 per cent dividends, this assumes a perfectly reasonable year – except it would offer returns less than one-third of 2024.

 

Listed gold

Gold is the ultimate global commodity that happens to offer Australian share investors a particularly extensive menu on the ASX.

The issue with gold forecasts is simple. Everyone in the gold industry is invariably of the opinion that gold is going to go up. And fair enough, gold went up about 30 per cent over the past 12 months.

As usual, gold analysts believe gold will rise again in 2025, and with the return of Donald Trump it’s hard to argue against them.

For gold stock investors, it’s all about whether the company you pick can deliver what it says it will deliver.

Resolute Mining is a market favourite, but who could guess its CEO Terry Holohan would be “detained” by Mali’s ruling junta, prompting a $500m sell-off in the stock?

We now get to the end of a year where gold went up 30 per cent and Resolute is down 2 per cent.

Meanwhile rivals are up, such as Northern Star, up 35 per cent, and Evolution Mining, up 42 per cent.
If you access gold through local shares your risk – upside or downside – is intensified.

 

The ASX

Guess what? The ASX is expected to do very little in 2025. Of course, we heard that last year too. Yet over 2024 it looks like the ASX 200 will come rolling in with a lift in prices equal to 14 per cent. On top of that, you can add dividends that should be more than 4 per cent, creating a total return of at least 18 per cent (before franking).

Forecasters got it utterly wrong on the ASX in 2024 because they continually called a “sell” on stocks that just kept pushing higher. The outstanding example is financial stocks, up 34 per cent for the year.

CBA, the biggest bank stock, is up … wait for it … 45 per cent this year (you can add the 3 per cent dividend yield on that, too).

Most brokers suggest bank stocks are now a “sell”. Perhaps it is time to take profits here – the chances that CBA will do 45 per cent again in 2025 would be similar to the chances of being struck by lightning … on your birthday.

Viewing the ASX on a sectoral basis, the other key forecasts relate to resources stocks. Mining is represented by “materials”, which fell 7 per cent over the past 12 months, and energy stocks, which recorded a drop of 17 per cent.

As Marc Jocum, investment strategist at GlobalX ETFs, suggests: “Some of the worst performing sectors have actually been energy and materials. On that basis, next year there could be a little bit of mean reversion.”

When you strip out the outliers, most forecasters are saying the ASX will offer almost nothing in price gains, leaving us with just the market’s dividend yield, which is close to 4 per cent.

 

Listed property

The interest rate cuts never came in 2024. In fact, we end the year with the same cash rate we had in January – 3.5 per cent. All up, national home values were up about 5.5 per cent over the past year while commercial property values were mixed.

Nonetheless, after a very tough spell, the listed property sector turned the corner in 2024, with A-REITs gaining 22 per cent.

Emboldened by these numbers and ready to vacuum up investor enthusiasm for anything related to the artificial intelligence boom, the float of David Di Pilla’s group was billed as the biggest float of the year when it came to the sharemarket on Friday morning.

It’s early days, but the float fizzled in its first session with DigiCo barely budging from its $5 IPO price in early trading.

It looks like listed property could offer another year of recovery in 2025, but the DigiCo float has tested the limits of investor enthusiasm.

 

James Kirby presents the twice-weekly Money Puzzle podcast.

This article first appeared in The Weekend Australian’s Wealth section.

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