While the stock market has experienced significant growth in 2024, the year 2025 may introduce new challenges that could potentially trigger a sharp decline. Several risk factors are looming on the horizon that have the potential to alter the market’s trajectory.
Here are five potential triggers that investors should keep in mind as we approach the new year:
1. Consumer Spending and Inflation: A Dangerous Combo
Inflation may continue to exceed the Federal Reserve’s target rate of 2%, creating economic uncertainty throughout 2025. Elevated inflation could result in higher interest rates, affecting consumer spending and market sentiment negatively.
If inflation persists, consumers may reduce spending, particularly on discretionary items, causing overall market performance to weaken as prices increase. Prolonged inflationary pressure could lead to tighter monetary policies and reduced investor confidence.
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2. Rising Debt and Potential Rate Increases
