Expect the Unexpected in 2025

This quote should be plastered in the office of every investor because it’s true. It’s also a reality that’s impossible to escape.

But we all have biases and perceptions that shape the way we view the world and what we expect in the future.

Keep that in mind as you see predictions for 2025 and the market’s early performance, which is continuing at an insane pace in just two days of trading. And I can’t help but think that those of us in the investing community are seeing 0.00000001% of the world and missing something. I just don’t know what that “something” is.

Perception vs Reality

Every investor and prognosticator seems to be more confident than ever going into 2025. It’s why stock valuations are sky-high and moving higher. I don’t even see anyone predicting a recession this year, and we know 100% certainty always works out as expected (sarcasm) if you remember the 2023 prediction from Bloomberg below 👇️.

This happens because those making predictions don’t have perfect information and are influenced by their own biases or perceptions of reality.

One of the things I tend to naturally do is fight conventional wisdom. It’s the contrarian in me, and it’s why I’m not one to get caught up in many hype cycles, for better or worse. When I see “everyone” agreeing on their predictions, I tend to go back and look at reality or take stock of my Midwestern worldview versus the coastal media and investing narrative. Do that, and you see things like:

• Perception: Everyone is buying EVs.

  • Reality: 91.1% of auto sales in the U.S. are NOT EVs.

• Perception: Housing is too expensive.

  • Reality: In thousands of towns in the middle of the country, you can buy a home — sometimes a very nice home — for less than $250,000 and have a mortgage payment of around $1,000 per month. Don’t believe me? See here, here, here, here, here, or here.

• Perception: The U.S. doesn’t manufacture anything anymore.

  • Reality: The data says otherwise, to the tune of $7.3 trillion of stuff, more than ever.

• Perception: Everyone is using AI.

  • Reality: In November 2022, ChatGPT attracted 100 million users in just 5 days. A year later, Sam Altman said it had 100 million users every 7 days…which is negative growth.

  • Microsoft’s Copilot has reportedly been adopted by only ~2% of Microsoft users.

  • Every company has to have an AI story, but most people who don’t work in tech or investing…don’t give a (bleep) about AI. There’s that Midwestern worldview coming out again.

I could go on. I don’t point these facts out to downplay the potential in any of these markets. Rather, I want to help readers level-set the market’s perception and valuations versus reality.

This is the natural tension of my style of investing.

I’m supposed to be an eternal optimist, betting on the asymmetric upside in everything. But is there upside when it’s the consensus view and already priced into a stock?

My natural disposition is that of a skeptic. Or maybe a skeptical optimist.

That may keep me out of trouble.

Or maybe I miss a lot of opportunities?

To take this back to the stock market, what I see across investing coverage and price action is the market’s perception of certainty about a bright future relative to the reality of slow adoption and underwhelming performance in a lot of markets (EVs, AI, robotics, etc). However, pointing out the reality in these markets is unpopular and met with backlash.

Where this matters for us as investors is this: If reality doesn’t catch up to the market’s lofty valuations, it will result in a crash as expectations readjust.

What’s In Your Bubble?

As Morgan Housel points out in the quote above, we inherently live in a bubble because we can’t experience everything the world has to offer.

Acknowledging the bubble is the first step in embracing the uncertainty that comes with investing from said bubble.

In my bubble, I see lots of land on which to build homes, full-size trucks and SUVs in every driveway, and kids…lots of kids.

That may be the opposite of your bubble.

What bubble do the economic prognosticators of 2025 live in? Does being on Wall Street or in a tower in Boston give a good view of the state of the U.S. economy in the middle of the country…where most people in the U.S. live?

Has the election and the prospect of lower taxes, less regulation, less government spending, more lax crypto rules, or [insert your hobby horse here] created a bubble of confirmation bias in your analysis?

What’s your age bias that naturally impacts how you view risk in the market? Here’s a fun fact: If you’re 33 or under, the last normal recession happened when you were in grade school!

There’s a lot we don’t know and a lot we can’t see as individuals. That creates uncertainty. Uncertainty is good for investors.

Embracing Uncertainty Is the Only Way

Most predictions are wrong because the future is inherently unknowable.

We may (or may not) have a recession in 2025 despite no one seeing one coming.

Artificial intelligence may (or may not) disappoint both users and investors this year.

The market probably won’t return ~10%, as most market prognosticators predict. Maybe returns will be higher. Maybe they’ll be lower.

Less regulation and lower taxes may seem great, but what’s the second or third-order impact? We don’t know.

Stocks often perform the opposite of conventional wisdom because conventional wisdom is priced in. The opportunity lies in what’s not priced in the market or a stock, which is uncertainty.

I try to start every analysis I do on a stock with an acknowledgment that I don’t know what’s going to happen. I have thoughts and opinions. And I try to back up those opinions with facts. But I can only put the odds of a positive outcome in my favor and make sure the upside is very large if I’m right and as small as possible if I’m wrong.

I won’t be right all of the time. And that’s a feature, not a bug of Asymmetric Investing.

Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.