The Markets IQ 2025 Predictions

It's that time of year again. Prediction season!

Every year, like clockwork, the financial world dons its festive hats and indulges in the annual farce of market predictions.

Analysts, influencers, and self-proclaimed "gurus" roll out forecasts that range from hilariously overconfident to outright absurd. The clowns of the digital circus throw out numbers and narratives designed not to inform, but to grab your attention and generate clicks.

Let's jump on the bandwagon and put forth our predictions for 2025. It's a short list, so strap in.

1. Most predictions for 2025 will be proven wrong, and the so called prophetic finance guru's will instead focus in on the 2 in 10 that played out Almost as they predicted in an attempt to save face.

2. The earth will continue to spin and revolve around the sun.

That's it. A short list.

Why Most Predictions Are Garbage

Nearly all predictions are wrong. Anyone who bases their strategy on them is setting themselves up for failure.

If you see investment research firms peddling their "Top 10 Picks for 2025," be skeptical. These firms often feel compelled to stick with losing ideas to save face, even when it’s clear the market has moved on. Things change fast.

Don’t let outdated predictions hold you back.

The fundamental problem with predictions is that they’re static in a dynamic world. Markets don’t operate in neat, predictable patterns. They’re messy, chaotic, and driven by a complex interplay of economics, geopolitics, and human psychology.

DON’T BE STATIC IN A DYNAMIC WORLD!

Yet every year, the same pundits trot out their crystal balls to tell us exactly where the S&P 500 will end or what the Fed will do by Q3. It’s an annual absurdist comedy of errors. Joseph Heller couldn't compete.

And the track record? Abysmal.

Take a stroll down memory lane and look at past forecasts: oil prices at $200; Bitcoin to $1 million by 2022; or the classic "this time it’s different" narratives. It wasn’t and it isn’t.

These clowns aren’t here to help you make better decisions—they’re here to feed the algorithm and keep you glued to their hot takes. They thrive on your clicks, outrage, and misplaced hope that someone out there knows the unknowable.

Framed properly, there is one good use for all these predictions. They should get you thinking about what’s possible. What could happen!

Also, they’re good for a laugh.

The Case Against Prediction

Predictions fail because:

1. They oversimplify the complex nature of reality. We want to predict whether the RBA will cut rates in April or not. But there is a whole world of nuance outside this binary scenario. Maybe they cut just 10 basis points instead of the full 25 to get us back onto rates ending in even 25-point increments and signal a real intent to keep moving. Is this still a cut? It’s not a full cut.

2. They cater to confirmation bias. As already mentioned most of these predictions are just for clicks, not a genuine effort to inform. These finance gurus are telling people what they think will sell. They’re telling people what they want to hear.

3. They ignore time horizons. There are predictable forces that we can all see happening. You don’t have to be a genius to see that in the next 20 years we’ll likely have roads full of self-driving cars and manual labour robots running our factories. We likely see continued integration of technology into our physical bodies with brain chips and such. Seeing it on the horizon is much easier than knowing when it’ll happen and more importantly which investments will capitalise on the trends the most.

Three Antidotes to Prediction Circus

1. Think in Probabilities, Not Certainties

Instead of betting the farm on a single outcome, embrace probabilistic thinking. Ask yourself: "What are the odds of various outcomes, and how do they impact my strategy?" For example, rather than predicting, "The RBA will cut rates in Q2," think in terms of scenarios:

• 45% chance of a rate cut in Q2 or before.

• 35% chance of a late 2025.

• 15% chance of no move.

• 5% Chance of a rate hike.

Factors that could impact this outcome include Australian inflation and unemployment, the looming federal election, Trump's impact on tariffs and inflation, and of course unexpected events.

That 5% chance of a rate hike is easy to miss. Most people would exclude the improbable disaster scenario from their forecasts.

But it's actually more likely than we typically account for. Check out The Black Swan by Nassim Nicholas Taleb.

By assigning probabilities, you prepare for multiple outcomes instead of anchoring yourself to one narrative. This approach is flexible and keeps you grounded in reality, not fantasy.

The genius of probabilities is they free you from the illusion of certainty, allowing you to adapt as the world changes. They also allow us to prepare and benefit from many different outcomes.

2. Scenario Planning

Predictions are rigid.

Scenarios are dynamic.

Scenario planning involves mapping out plausible futures and crafting strategies that thrive in multiple realities. Instead of saying, "Tech will boom in 2025," consider these questions:

• If AI adoption accelerates, where will the biggest wins be? Will it be in the generic tools like ChatGPT and Copilot or will we see the rise of niche and customised AI solutions?

• If AI faces regulatory hurdles, which companies have the most regulatory risk? Will it impact hardware manufacturers like NVIDIA or just the software providers like Google and Microsoft?

• If global growth stalls, how does that impact tech valuations?

• Can Qualcomm displace Intel and AMD as the leader in laptop chips with their latest generation of highly efficient and powerful AI processors?

• Is this whole AI thing distracting us from the massive potential of Quantum Computing which is actually already taking off and most of us just aren’t paying attention yet?

Scenario planning builds on our idea of probabilities above. However, you don't necessarily have to assign a probability to each outcome.

The main difference is that we take the thought experiment even further. Rather than keeping it as simple as when will the RBA begin cutting, we can map out the myriad flow-on effects from such a move, and what it means if we've gotten there.

For example, a rate hike in 2025 instead of a cut means the vast majority of the market will be caught in bad positions. There’ll be carnage as a massive rush happens to unwind positions.

With scenario planning, we take the flexibility and open-mindedness of probabilistic thinking and add an indepth exploration of all the flow-on effects.

3. Focus on Trends, Not Fads

The obsession with year-ahead predictions blinds investors to long-term trends. Instead of chasing this year’s "hot sectors," focus on secular shifts that play out over decades. These are the trends that, while unpredictable in timing, are inevitable in direction:

• Aging populations driving healthcare innovation.

• Decarbonisation transforming energy markets.

• AI and robotics reshaping entire industries.

• Self-driving cars reshaping our roads, homes and shopping centres.

Timing these trends is tricky, but positioning for them is invaluable. Pick quality investments that you can hold onto for long enough for the idea to play out. Make sure you can control your risk.

Add More Edges

To be the best trader or investor you need to be constantly asking yourself how do you add another edge or advantage to your toolkit. Remember, you aren’t forced to take every trade. You can trade once per decade if you like.

Many of the best traders of all time have made most of their money from just a handful of great trades. Read Market Wizards by Jack Schwager if you want some inspiration.

1. Look for Asymmetry

In investing, asymmetry is your best friend. Focus on opportunities where the upside significantly outweighs the downside. Even if the probability of success is low, the payoff could be life-changing. Think early-stage technologies or emerging markets with transformative potential.

Sure, there’s risk, but it’s calculated, not reckless.

It’s the kind of thinking that turned small bets on companies like Tesla or early Bitcoin into generational wealth.

To take it a step further we want to look at expected return. There are two components to this. The first is the probability of each scenario, and the second, the return if a particular scenario plays out.

So let's say a company is expecting the result of an application for FDA approval for a certain drug. The approval is widely expected, with an 80% chance likelihood. The stock is expected to move up by 20% on approval. The 20% chance of a knock back carries the risk of a 50% fall in the share price.

To calculate the expected return we add the two scenarios together.

(0.8 x 0.2) + (0.2 x -0.5) = 0.16 - 0.10 = 0.06

So our expected return is 6%.

This means if we ran this trade over and over again, over time we would expect to make roughly 6% per trade. If we’re holding for a short time, this could be a very profitable trade repeated many times per year.

However, it comes with a very high volatility in results. If we hit 3 or 5 losers in a row it could derail things. But what if we can hedge against this volatility?

That's largely what options are about.

Options are core to a lot of the trade ideas you'll see bounced around the reddit forum r/wallstreetbets. They’re tool for achieving asymmetric returns, offering the possibility of outsized gains while capping potential losses.

Options allow you to hedge against extreme outcomes (volatility) while leveraging small amounts of capital to control larger positions. For instance, buying a call option on a stock provides exposure to its upside but limits your loss to the premium paid if the stock doesn’t move as expected. Similarly, buying put options can hedge against catastrophic losses in an existing portfolio.

This strategy thrives in environments with unpredictable outcomes, where black swans or sharp market moves are not fully priced into the market. By thoughtfully using options, you maintain exposure to asymmetric payoffs, minimize downside risks, and improve the probability of achieving long-term profitability.

We can also use options to hedge positions. Let’s say you’re long a bunch of tech companies and worried there could be a downturn in tech. You can buy out of the money put options in the Nasdaq 100 index. If prices fall you make money in your options to offset the losses in your stocks.

A word of warning however. Options are very complicated instruments and carry a lot of risk. If you’re interested in using them, make sure you research, get educated and fully understand what you’re doing first. They’re not suitable for MOST investors.

2. Diversify

Don’t rely on a single narrative or idea.

A diversified portfolio of strategies protects you from being blindsided. Spread your bets across sectors, geographies, and asset classes.

Diversification isn’t just for your portfolio. It’s for your thought process too. It’s about staying intellectually agile, so you’re not caught flat-footed when the unexpected inevitably happens.

3. Understand Behavioral Biases

Predictions fail because humans are irrational.

Cognitive biases, herd mentality, and emotional investing are all kryptonite to accurate forecasting. Instead of trying to predict market behavior, focus on understanding it.

Knowing when fear or greed is driving the market can be more valuable than any "expert" prediction.

4. Reflect on Yourself

Here are some quick secrets to making money trading. There’s no shortcuts. You have to develop your own arsenal of trading tools.

If you’re looking for someone else to tell you all their secrets you’ll get taken in by all the fraudsters out there. The best traders, who really make money don’t give away their secrets.

Not only that, but even if they did, you probably couldn’t make money with them anyway. Because you have to understand your own strategies inside out and believe in them 100%.

The best approach is to take whatever wisdom and insight you can glean from others, but build your own strategies and your own approach from the ground up, with your own research and hard work.

That’s the only secret to getting rich trading.

It’s hard work.

5. Be Humble

Or the market will humble you.

The most honest and underused phrase in investing is "I don’t know." Admitting uncertainty isn’t a weakness—it’s a strength.

It keeps you humble, curious, and open to new information. The clowns in the prediction circus will never admit this, but it’s the key to staying adaptable in an unpredictable world.

You don’t have to take every trade, and if a trade or scenario doesn’t go as planned it’s ok to get out and reassess. Ask yourself does the premise still hold? Am I trading with my emotions now? Don’t try to be the kind of trader you’re not. This goes back to understanding yourself and building the trading style that works for you.

You also need to get comfortable with being wrong…a lot. Good traders can be wrong way more than they’re right. It’s how you respond to being wrong that’s important.

The Real Edge in 2025

As we continue into 2025, don’t waste your time on flashy predictions from click-hungry clowns. Instead, embrace probabilistic thinking, scenario planning, and long-term positioning.

Add a sprinkle of asymmetry, a dash of diversification, and a hefty dose of behavioral insight, and you’ll be miles ahead of the prediction crowd.

The real edge isn’t in guessing what will happen—it’s in preparing for what could happen. So, ditch the crystal ball and start thinking smarter. The clowns can keep their circus. You’ve got a strategy to build, a portfolio to grow, and a future to shape.