Bank of America Outlines 14 Key Lessons for Investors in 2025
Bank of America recently highlighted 14 key lessons that investors should keep in mind as they head into 2025. The lessons caution that market momentum and stretched valuations could face headwinds in the year ahead.
2024 was a strong year for markets, but the combination of strong momentum and high valuations is already too stretched to avoid a potential bust. The market’s performance in 2024 looked more like the steady gains of 1996-97 than the bubble peaks of 1998-99.
Investors are warned to be cautious about being caught short, as fewer crowded trades mean less volatility pain. European equities remain cheap and unloved, while China’s outperformance over Japan in 2024 could continue if U.S. interest rates decline.
Market fragility, faster reactions, and elevated valuations suggest a repeat of the calm volatility seen in 2017 is unlikely. Rising debt levels and persistent inflation mean bond vigilantes remain the most visible macroeconomic tail risk.
Other lessons include the importance of using smarter strategies like skewed delta positioning, being cautious of a Trump election victory, and hedging against a different outcome in eurozone bank dividends. The risk of sharp movements in the Japanese yen, driven by volatility, could also cause instability for the global market in 2025.
