David Royal of Thrivent, back row from left, Jill Schurtz of SBI, Roger Sit of Sit Investments, Ben Marks of Marks Group, Craig Johnson of Piper Sandler, front row left, and Carol Schleif of BMO, front row right, pose for a portrait in the Star Tribune photo studio in Minneapolis, Minn. on Monday, Dec. 9, 2024.

Twin Cities-based investing chiefs predict a bumpy year for stock markets

But participants in the annual Investors Roundtable also believe markets will end the year with growth, as President-elect Donald Trump’s policies come into focus and trends like AI continue.

By Patrick Kennedy, photos by Leila Navidi

The Minnesota Star Tribune

December 27, 2024 at 7:01am

S&P 500 in 2024

Investment leaders based in the Twin Cities believe the stock markets will be bumpier next year — how unpredictable they are could depend on how many of Donald Trump’s campaign promises are carried out, including tariffs, deportations and deregulation.

Yet participants in the Minnesota Star Tribune’s annual Investors Roundtable are optimistic that the markets will land at the end of the year with a hefty increase, with predictions of a 6.2% to 20% bump in the S&P 500 index, the most commonly followed measure of the U.S. stock markets.

Weighing in this year: Ben Marks, founder and chief investment officer of Marks Group Wealth Management; Carol Schleif, chief market strategist for BMO Private Wealth; Jill Schurtz, executive director and chief investment officer at the Minnesota State Board of Investment; Craig Johnson, chief market technician at Piper Sandler; Roger Sit, chief investment officer of Sit Investment Associates; and David Royal, chief financial officer and chief investment officer of Thrivent.

Meet our roundtable

Ben Marks, founder and chief investment officer of Marks Group Wealth Management

Carol Schleif, chief market strategist for BMO Private Wealth

Jill Schurtz, executive director and chief investment officer at the Minnesota State Board of Investment

Craig Johnson, chief market technician at Piper Sandler

Roger Sit, chief investment officer of Sit Investment Associates

David Royal, chief financial officer and chief investment officer of Thrivent

In 2024, the markets held steady on the strength of the Magnificent Seven tech stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nividia, and Tesla). By the time those seven showed some volatility, the broader market was riding again, and that overall strength is expected to continue in 2025, participants said.

The investment heads talked for more than 90 minutes about a wide range of topics, from Trump’s policies to artificial intelligence and strategies for investing next year.

Our guests met on Dec. 9 this year, when the S&P 500 Index trading at 6,082. A year-ago a different mix of guests met on Dec. 11, 2023 and made estimates ranging from 4,500 to 5,100. Roger Sit had the best prediction of 5,100.

The following has been edited for length and clarity.

The 2024 stock market exceeded expectations: How did it happen?

Schleif: Through the first four or five months, you had seven stocks basically leading the way, but you’ve seen a real unique inversion of that trend. The market rally started narrow, and now it’s broadened pretty significantly, especially in the back half of the year. The other thing that hasn’t been talked about much, that we leaned into, is the fact that our productivity as a country has been advancing 2% a year for the last five years, and that’s above the long-term average. There’s a lot of trends in place that are supportive of markets.

Royal: We were not in the recession camp. We were expecting continued growth, so that was definitely not a surprise to us. I’ve used the expression “it felt a little 2017-ish” because the market kind of went straight up slowly. People get much more optimistic when the market’s up 25% and it has been less volatile. In 2023, the market was up over 20%, but it didn’t feel like it, and the confidence in investing wasn’t there.

Schurtz: It’s surprising to me how the year ended up, given that we really had some remarkable things going on around the world that normally would throw us for a loop as an economy. We really took on China in a very major way. I mean that that world power conflict came front and center and only continues as a dominant theme. We had conflict in the Middle East, Israel and beyond that continues, and then we had serious supply chain disruptions in the Red Sea, and yet our economy marched on. The term that keeps getting used is American exceptionalism, and it’s really hard to argue with that term in some ways, when you think just about the economy, when you look at all the strife that we experienced.

A couple of themes that have come out of this year are U.S. energy policy and the electrification of the the world. They are definitely linked. If you’re a manufacturer today and you want to pick your new spot in the United States … one of the major factors you were looking at for sure is the availability of power, your ability to get it in a timely, reliable way. We’re in a power-hungry world. We’re moving into a world of deregulation, hopefully. I would say easier permitting and I think a regulatory regime that will confront the issues to try to move the power problem forward.

Johnson: This was a year where we climbed the wall of worry. Everybody was nervous all year long, finding reasons why they couldn’t engage, then they finally engaged or started to engage. But I don’t get any sense of euphoria out there. I’ve asked the question to many, many investors, and there’s nobody that’s like, “Yeah, this is a euphoric market.” This is a market that’s just moving up on momentum. Lastly, I’ll just say this, if I look back over the last 15 years and why people should remain invested in equities, we’ve only had two down years, 2022 and 2018, over the last 15 years. So from my perspective, with the Fed cutting rates, inflation coming down, yield curve normalizing in 2024 — it’s setting us up for I think for a very good 2025.

Tech stocks dominated over the last two years. Will more industries participate going forward?

Schurtz: We expect a broadening of the market. And sometimes when we talk about those things, it’s kind of a reversion to the mean theme. But I think the fundamentals are actually really strong. When you think about small-cap stocks, in particular, they’ve been beaten down for a long time. You now enter a pro-growth environment where interest rates are coming down. I think this is an environment where small-cap companies can thrive. And I agree, active management is going to pay dividends here.

Royal: I agree with the small-cap theme. If you look back to the dawn of the internet, the original names that benefited were the infrastructure names. But then it ultimately broadened out to the applications of technology. So the ultimate beneficiary of the internet was probably Amazon, a retailer. And I think you’re going to see, as we broaden out, you’ll see the benefits of AI in particular, but technology in general, flow through to these other industries.

Schleif: An interesting thing, too, is I really do think you’re teeing up an IPO and M&A boom going into next year. I saw a stat that at the beginning of this year, there were 27,000 portfolio companies in venture capital portfolios. Over half of them had been there more than four years. And there’s over 1,000 unicorns (privately held companies valued at over $1 billion). And granted, they haven’t needed the public market, they’ve been able to be funded by all of the private money going into those VC funds. But that private money eventually wants a return.

Marks: There’s a reason that the Mag Seven are so significant. I mean, they have amazing, profitable business models, very strong balance sheets and and they’re so embedded in our lives. I mean, since we’ve been here, how many times have we touched Google, Amazon? I think the Mag Seven will continue to perform well. I don’t believe they will have the outperformance that they’ve had in 2024, but there’s a reason that they are as strong as they are, and I don’t see that changing. We are less bullish on the small-cap names. For our investors, we would rather have something that’s more consistent performers. So we’re going to stick with mid and large.

Johnson: If you actually look at the broadening of this market that’s taken place, it’s not then just the Mag Seven. In fact, when you look at this out of the 50 best-performing stocks in the S&P 500 for this bull market, only two of the Mag Seven made the top 50, which was Nvidia and Meta. Otherwise, there was a lot of other stocks in here that investors would know, such as Palantir, Fair Isaac, even General Electric made the top 10.

Sit: The sectors that tend to do well when you cut interest rates are more economically sensitive companies, and there are companies that have not done well, that have been overly beaten up, such as small caps. Now if things are starting to get better because the monetary policy is becoming more accommodative, and not just in the U.S. but all around the world, that creates that tailwind for a lot of stocks that were left behind to start doing better.

What is your early take on the new administration and what it means for the markets and investors?

Schurtz: I do think there’s a raft of positive things we can say from a policy perspective that we expect, but I do want to pick up on something that I think we’re going to see this year. I think we’re going to see more volatility, because these are going to be fundamental changes, and the market is going to have to digest it. And there’s a tremendous amount of unknown. So on the one hand, I think deregulation is largely positive. Trade policy — we don’t know where that’s going to end up, tariffs, that is a question mark. If it’s a negotiating tool and it puts us on a better footing. Obviously that could be positive. It could also be tremendously inflationary. We won’t know till we see it happen, and markets don’t tend to love that, so I expect a lot of volatility around that.

Marks: Knowing what we know about Trump from the last administration, he used the stock market as his report card, and he was probably the most stock-market-friendly president that we’ve had in modern history. That won’t change. He wants the stock market to be at meaningful highs because of his ego. So I tend to believe that the administration will do things that, at the end of the day, are pro-growth and will be good for investors.

Sit: The question is, is President-elect Trump the master negotiator, or is he a radical disruptor to the current system? And as an investor, you have to figure out which way it is. He has pro-growth as well as anti-growth and inflationary measures. You know, the pro-growth is certainly deregulation, it’s certainly spending on different projects. The anti-growth is certainly the tariffs and immigration.

[For his legacy] he needs growth. Strong economic growth will reduce the deficits, both trade deficit and our national debt. The only way to grow is people and productivity. If he mass deports everyone, it isn’t gonna happen. He’s gonna deport some illegal immigrants that have committed heinous crimes then say I did exactly what I was going to do.

In terms of tariffs if he puts 45% tariffs on China, 25% tariffs on Mexico and Canada, our economy is going to come to a screeching halt. So he’s not gonna be able to do that either, because he needs that growth to accomplish the rest of his agenda.

How should investors analyze the artificial intelligence use by companies?

Johnson: I think the initial way that AI is going to be used across the board is not for new apps, not for new products, but for cost-cutting. If you can save 10% to 20% of the cost of goods sold with AI, you’re talking about a sudden, substantial profit driver for corporations. JPMorgan has talked about saving 360,000 hours of labor annually by using their AI programs. Cost savings are really starting to roll in, and it sort of begs the analogy back to where we were with the internet and where we were back with PCs, and you’re starting a whole new productivity cycle. And AI will be the cost-saving driver, initially.

Royal: For the first quarter or two, any company that was throwing money at AI got rewarded for it, or certainly got the benefit of the doubt. I think buy-side investors, like we are, are becoming much more discerning on what’s the return on investment.

What investment style are you favoring in 2025?

Schleif: We continue to lean into growth at all capitalization styles and are overweight U.S. But we also like some noncorrelated assets. Private capital is big piece of our high net worth and ultra high net worth portfolios. There are a lot of things we try to do for your investors that are not just a 60/40 stock to bond portfolio.

Marks: We’re gonna stick with what we know. And, and that’s been GARP, growth at a reasonable price. An equally weighted strategy that’s valuation driven, probably is a good place to be this year.

Sit: A stock can be driven higher when the fundamentals look good, meaning revenues are growing, margins are expanding and earnings are expanding. So we’re looking for growth companies to fit that definition. I think dividend payers are going to do quite well, but I would focus on growth stocks that pay a dividend and can grow a dividend. Don’t just try to buy the cheap stock that has a huge dividend.

What is your S&P 500 index pick for 2025 and how do we get there?

Schleif: 6,900. I honestly think we’ll have another good, solid year, because of a lot of things I’ve already mentioned. In terms of, we really have a lot of growth going in the United States, consumer optimism. We’ve been climbing the wall of worry for the last two years. It’s not insane yet. I think its stacked up to be a pretty positive year.

Marks: 7,300. The reality is in my 42 years, there have been eight occasions where the market actually had single-digit positive returns. So oftentimes, when asked what the market does, the easy answer is 8 or 9% but the reality is that only happened eight times out of 42 years. What’s also interesting, during that same 42-year period, 18 years had better than a 20% return. I think we continue to get some PE expansion, we continue to see that earnings growth and and, you know, I’m putting out that we’re going to have another 20% year next year.

Schurtz: 6,700. Ten percent growth would be my bet. But I do think there is an asterisk in the 6,700. I do think we’re going to see a lot more volatility. The endpoints may look good and feel good, but I think we’ve got some roller coasters along the way.

Johnson: 6,600. The street consensus is at the upper end, 7,100, and the low end is 5,800. I’m toward the lower end of the spectrum here. If I go back to every bull market advance off of the lows post-World War II, the third year is always the weakest year. You only have a 5.2% average return. I‘m sort of aligning myself with history, but also from my bottoms up, point and figure model too. And then again, the sectors to be overweight, from my perspective, are financials, industrials and technology.

Royal: 6460. The two things I feel strongly is returns will be below 2024 and we’re gonna have more volatility than in 2024 I think it’ll be a more normalized return. I think we’ll see somewhat below long-term returns, but, you know, still positive, but probably with a lot of volatility along the way. I think there are times this year where it’s not going to feel good. Valuations are high going in and they can go higher, but valuations are fairly high.

Sit: 6,500. Even. I think earnings are going to grow closer to 10 to 12% and I actually think we see multiple contraction. Multiples expand in anticipation of things getting better and I think the last two years you’ve seen a significant amount of multiple expansion, both in 2023 and 2024. Now it’s show me the money you got to show the earnings. And if earnings are going to grow 10 to 12% and you see multiple contraction, I’m going up about 7% so 6500 from the close on Friday,

Prediction for where the S&P 500 is going in 2025

Carol Schleif - Chief investment officer of BMO Family Office, a subsidiary of Bank of Montreal

Ben Marks, founder and chief investment officer of Marks Group Wealth Management

Jill Schurtz - Executive director and chief investment officer Minnesota State Board of Investment

Craig Johnson - chief market technician at Piper Sandler

David Royal - Chief financial officer and chief investment officer of Thrivent

Roger Sit - Chief investment officer of Sit Investment Associates (the best prediction last year 5,100)

about the writer

Patrick Kennedy