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Trying to accurately predict where the stock market is heading in 2025 is futile. But if I had to hazard a guess, I’d say it’s going to go up.
Why? Because historically the stock market has tended to rise approximately two out of every three years. Or about seven out of 10 years, on average.
Therefore, if I say it’ll rise every year, I’m going to be right roughly 70% of the time, give or take. Those are fantastic odds — far better than the track record of most market commentators!
However, the reality is that the stock market will crash at some point, because history also teaches us that.
But my ISA is ready
Recently, I sold my long-held position in chipmaking equipment provider ASML, taking some profits. I have less conviction in its growth prospects due to increasing restrictions on it selling its machines (and potentially aftermarket customer support) to China.
I also sold off a couple of smaller ‘meh’ holdings that I’ve lost confidence in. They hadn’t performed as I’d hoped, and I don’t want to double down, so I’ve parted ways.
Consequently, I have quite a bit of cash sitting in my Stocks and Shares ISA. If 2025 is a down year — especially a BIG one — I now have some powder dry.
Risks ahoy!
As I said, I think the market is going up, based on history. But I’d be naïve not to notice a few risks about.
One is geopolitics, whether it’s the Middle East conflict, a serious escalation in Ukraine, or the unresolved China-Taiwan dispute. Any of these has the potential to send the market into a tailspin.
Another is a potential trade war due to Donald Trump’s proposed tariffs. According to analysts at Barclays, tariffs may cut S&P 500 earnings by 2.8% next year. And they could stoke inflation.
Finally, the S&P 500 is highly valued after its meteoric 27.5% year-to-date rise. A bit of benign profit-taking could quickly snowball into an avalanche of selling, spreading to the London exchange.
One FTSE 100 stock I’d like to buy at a crash-cut price is InterContinental Hotels Group (LSE: IHG). The firm owns many well-known brands, including InterContinental (obviously), Holiday Inn, and Crowne Plaza.
What I like here is that the company is truly global so isn’t reliant on the UK economy. And its portfolio ranges from luxury spa resorts to budget-friendly hotels, catering to every type of traveller.
The share price has performed strongly, rising 42% in just the past year. Indeed, it’s just off a record high.
Unfortunately, this means the stock’s currently trading at 33 times earnings. Granted, IHG is a high-quality company, but the valuation is a wee bit high for me.
The share price doesn’t leave much margin of safety in case, say, global travel was disrupted by some event. Or a spike in inflation reduced the number of people booking holidays and jetting off in 2025.
Longer term, however, this is a stock I’m bullish on. IHG has strong loyalty programmes, offering perks that incentivise guests to choose its hotels.
Meanwhile, more baby boomers are entering retirement, with the time and wherewithal to explore the world. This presents a significant opportunity for IHG.
