What is investment research for? Here are some possible answers.
generate investment ideas
Set or contribute to setting consensus expectations
Give bank and asset management company employees an opportunity to talk to customers and vice versa.
An introductory business card for analysts and strategists.
Provides investment advisors with the opportunity to discuss with their clients
It works like a pump and dump to spread the same trading idea to a group of investors.
Give investors a scapegoat if a deal goes wrong
it’s marketing
The one year ahead preview doesn’t fit into any of these categories. Their themes are necessarily approximate and broad. The forecasts it contains are informational rather than informative and focus on things like global GDP. Forecasts are truncated to calendar years, adding difficulty rather than value. Final drafts are often sent to editors in October, making any recommendations even more outdated and backward-looking than the typical sell-side. The practical advice they offer will expire on January 2nd.
The rest is marketing, but the outlook for the year is not even good for promotion. Too many reports drop off in Q4 to get the message across. The content is too similar for broker-client matchmaking. The ideas they may encourage their readers are probably ones they already have. Confirmation bias makes it more similar to horoscopes than traditional investment research.
The good news is that whatever one-year-ahead bias you want to see, you’re sure to find it somewhere. Goldman Sachs has released 46 outlook notes for 2025, 10 overview presentations and a 30-minute podcast. Bank of America has 50 individual reports. Morgan Stanley’s 2025 Outlook landing page includes 76 reports, 9 summary presentations, and video explanations.
Have you read all these? Absolutely not. Did I read enough to get an overview?Again, no.
Have you put some reports into large files and fed them into ChatGPT? Yes. That’s exactly what we’ve done.
Did ChatGPT mess up the details and approximate a decent overview? Yes.
These predictions are interesting and can easily be proven wrong. US hyperinflation and a 70% decline in the S&P 500 index are not consensus expectations. Here is (based on unscientific excerpts of available outlook notes):
(Click to see a detailed forecast table for JPMorgan, Morgan Stanley, UBS, Deutsche Bank, BofA, and Goldman. Barclays, SocGen, and BNP Paribas are also included in the sample, but the proper table is )
Although a significant number of these forecasts represent a reversal, the S&P 500’s 8.4% increase from current levels is slightly below its average annual performance.
It’s natural to be wary, given that U.S. stocks have been rising at an annual rate of more than 20%. No matter how you look at it, valuations for U.S. stocks appear to have limits. However, the conventional logic is that the stock market will only fall in response to an interest rate hike or a recession, and both are unlikely to fall in the next 12 months. No matter what problems accumulate, they are for the next person.
In other words, . . . Say your line, Bart!
This is the best time to be a stock investor in 25 years.
(Sokugen)
We expect stock pickers to have even richer opportunities next year as the Fed eases policy amid still-solid growth, a tight labor market and record household wealth. This, combined with uncertainty in the policy agenda, should help extend equity leadership with high diversification across the market.
(JP Morgan)
The dispersion of sector returns is even higher than it was after Trump won his first presidential election. If stocks follow the Trump 1.0 roadmap in response to policy shifts by the outgoing administration, diversification could remain high and it could become a stock (and sector) picking market.
(Barclays)
Europe is a stock-picking market: Since we recently downgraded European stocks to neutral, a question some investors have asked us is, “Given the potential for continued underperformance relative to the U.S., Why spend time in this area? Our answer, backed by a high degree of confidence, is the significant extent of alpha generation that lies beneath the surface of the headline performance of EU stocks.
(Morgan Stanley)
To find out why next year will be another stock-picking year, you’ll have to read the research, and we don’t want to read that. Perhaps it all has to do with the theme (i.e. AI), American exceptionalism (i.e. tax cuts). And the long-term profit growth part (meaning AI and tax cuts). President Trump’s policies of reflation and deregulation hold promise for certain sectors, as long as investors are willing to accept the volatility that comes with government. While tariffs complicate everything, a strong dollar and consensus expectations for stable or falling oil prices could help contain inflation.
You can infer all of this without even looking at the notes, because the strategists spent months writing these notes.
Add the details that US stocks have been unusually uncorrelated these days. Assuming this trend continues, SocGen’s call for the “Best Stock Picks of the Last 25 Years” includes deregulation of US-first domestic stocks, small-cap stocks, financials and cryptocurrency exchanges, as well as S&P This includes focusing on weights.
Europe? Bad but cheap. “We think there are tactical opportunities in Europe,” says Exanne BNP Paribas, but this is just another way of saying Europe will become a stock market. The firm’s recommendations include European exporters that are pricing in tariff tape bombs and tech stocks that lag the Nasdaq.
Japan? Stock pickers market. Here’s Goldman.
We expect TOPIX to deliver its third consecutive year of positive returns in 2025. Additionally, for fundamental stock pickers, it will focus on attractive top-down investment themes in sectors with clear bottom-up dispersion in terms of growth prospects, valuations, and valuations. and/or shareholder engagement momentum should continue to create solid alpha opportunities.
As I said at the beginning, this kind of thing makes the most sense as marketing. The problem is that targeted marketing is inadequate. A large number of reports end up in the wrong place, such as an author’s inbox, away from those seeking a top-down portfolio strategy.
That’s why I saved a selection of 2025 outlooks to a shared Google Drive. (Access is by request only, so it’s similar to The Long Room. Tell them you’re an investment expert and they’ll probably let you in.)
FTAV typically broadcasts a year-ahead report roundup for free in early January. In the meantime, if you found anything interesting in the above report, please let us know so we can save you the trouble of reading the report.
Read more
— Full Economic and Market Outlook for 2023 (FTAV)
— “Year of the Stock Picker” Revisited (FTAV)
— Nobody knows anything (Rupak Ghose)