Finimize - 🥇 Good as gold

What’s going on here?

Gold may be off its highs for the year, but Goldman Sachs still loves the look of it.

What does this mean?

Gold's glitter has dimmed in the past two weeks. A stronger US dollar and rising interest rates have made the metal pricier for overseas buyers and less appealing compared to income-generating assets like bonds. So after a good run – a stunning 15% rally in 2023 and another hefty 25% this year – some investors have decided to sell their gold and take the profit. But Goldman says this party is far from over. Two of gold’s three big drivers are still solid: central banks are hoarding the metal to reduce their reliance on the US financial system, and investors are flocking to it to bet on rate cuts and find a respite from uncertainty. And while more “speculative” traders (who take punts on market movements) might eventually give gold the cold shoulder, the investment bank still sees another 17% gain by the end of 2025.

Why should I care?

For markets: A bright star.

Goldman says there’s room for gold to shine even brighter than that, too. If worries over the US government’s economic policies start to bubble over, Goldman sees the metal climbing above 20%. And if trade tensions heat up as many expect, more investors could pile in, bringing gold’s potential gain up to 25%. The shiny commodity might then become the go-to safe haven for central banks, investors, and speculators alike.

The bigger picture: Proceed with caution.

Gold’s strong performance over the past two years is a flashing warning signal, telling you that risks may lurk beneath the surface and that things mightn’t be as calm as they seem. It’s a subtle reminder to all stock market optimists to take a second look: those risks might not remain out of sight forever.

What’s going on here?

Morgan Stanley surprised markets earlier this year when it turned from Wall Street pessimist to optimist – and it’s just doubled down, with rosy predictions for the S&P 500.

What does this mean?

Morgan Stanley has joined Goldman Sachs on the sunnier side, with both expecting US stocks to climb around 10% by the end of 2025. Morgan Stanley’s now predicting sturdy revenue growth in the mid-single digits, higher profit margins, and a recovery across more sectors – all backed by interest rate cuts. As a result, the investment bank sees average earnings-per-share growth at a hefty 13% in 2025. And though valuations have stocks looking pricey, the bank says confidence from investors and companies (what they call “animal spirits”) will keep the market hopping and help avoid a big drop. Between that double-digit earnings growth, stable valuations, and maybe even a little dividend boost, you can see why Morgan Stanley’s calling the glass half-full.

Why should I care?

For markets: Choose your adventure.

Morgan Stanley sees 2025 as a sector picker’s market. And the firm’s top pick is, ahem, its own: financials. It sees companies in that sector doing well, with a rebound in market activity, a ramp-up in share buybacks, and the potential for looser regulations. In tech, the firm prefers software to semiconductors for better valuations and cheerier profit outlooks.

The bigger picture: Prepare for surprises.

As with any future predictions, reality may look nothing like Morgan Stanley’s base-case scenario. If things take a positive turn, the bank could see the S&P 500 soaring 26%, fueled by productivity gains or those animal spirits. Or if things go in the other direction, Morgan Stanley’s envisioning a 22% drop for stocks – alongside a potential recession and other economic concerns. If that range of possibilities seems unusually wide, it is – and that highlights the uncertainty investors are facing right now. So make sure your portfolio isn’t betting the farm on big-picture forecasts playing out precisely as you expect.