Reviewing the 2025 Forecast

Last year, I was still genuinely excited about how well The Economy Tracker was working. This year, that initial excitement has worn off. Not because it stopped working, but because it has continued to do exactly what it was designed to do. At this point, I simply expect it to perform.

Once is an instance.
Twice could be a coincidence.
Three times in a row is a trend.

This marks the end of the second year I’ve shared my work publicly, and the results continue to be an overwhelming success. Very few people can say that, especially those who have built something independently, without institutional backing or a large support structure.

While this year’s market volatility and economic slowdown caught many off guard, it served as further confirmation of the value of The Economy Tracker. It consistently helps position for what comes next, rather than reacting to what has already happened. Most market participants, by contrast, resemble generals fighting the last war. As they are anchored to conditions and narratives from an era that has already passed. That is precisely why the majority fail to outperform the indices over time.

This was also another year that reinforced a simple truth: proper positioning, viewed through the lens of The Economy Tracker, can lead to consistent outperformance.

I’m often told that understanding the economy and using macroeconomic analysis to beat the market on a consistent basis “can’t be done.” However, I believe that commonly accepted axiom is now outdated. More often than not, when someone says something can’t be done, what they are really saying is that they haven’t been able to do it themselves.

That distinction matters. This approach is not for those with fixed mindsets or for people content with mediocrity. The Economy Tracker is built for those with growth mindsets. People who believe they can continue to learn, adapt, and improve across every area of their lives.

And with that comes less chest-thumping on another great forecast than I did last year. At this point, consistently accurate results are no longer surprising. They’re simply expected.

Reviewing the 2025 Forecast

While you can read the entirety of the 2025 Forecast, here are the quick highlights of predictions and outcomes:

Economy & Credit Cycle

2025 Forecast:

• US economy in a Slowdown and inching closer to the recession phase of the credit cycle

• Recession likely to arrive in late 2025 to early 2026

• If recession occurs, it's expected to be milder and shorter than usual (absent a major financial collapse)

2025 Result:

While it appears that there is no recession yet, the aggregate data reflects what you typically see in Economic Slowdowns since the end of WWII is happening now. Such as:

• Fed Rate plateau’s and begins to fall ✅ 

• Inflation pressures begin high and break lower ✅

• Defaults bottom out and begin to rise into Recessions ✅

• M&A accelerates and peaks. Volume intensifies, high valuations, mega-deals become prevalent ✅

• CapEx accelerates ✅

• Yield Curve steepens ✅

• Unemployment Rate begins to drift higher, led by rising continuing claims. ✅

Market Performance

2025 Forecast:

• S&P 500 to hit 6,450 (likely in the first half of the year before rolling over)

• Expect a 15%-20% market correction in either Q1 or Q3

• Higher volatility throughout 2025 (continuation of the uptrend that began July '24)

2025 Result:

The S&P 500 reached 6,450 in Q3 and consolidated at that level for several weeks before pushing higher, ultimately topping out at 6,945.77 in December.

As anticipated, markets experienced a roughly 20% correction in Q1.

Volatility also behaved exactly as expected. The VIX averaged around 21 based on daily closing prices, which firmly places it in a high/elevated volatility regime. That level of volatility throughout the year reinforces the broader macro backdrop discussed in the 2025 Forecast and throughout the year.

Inflation

2025 Forecast:

• Inflation to stay elevated (above 2-2.5%) throughout most of the year

• Potential peak in the 4%-5% range

• Won't return to 7%-9% levels unless mass deportations + tariffs + massive spending increases all occur

2025 Result:

Annual inflation rates so far:

PPI 2.94% thru Sept
CPI 2.69% thru Nov
PCE 2.56% thru Sept

Federal spending increased at 0.86% from 2024 - 2025. ($6.95T - $7.01) This and 2025 deportation numbers is not nearly enough for the return of 7-9% inflation rates. Especially since tariffs were consistently lowered since Liberation Day.

Tariffs

2025 Forecast:

• Net negative for economic health and jobs

• Negative effects could surface mid-to-late year if implemented early

2025 Result:

The negative effects did begin to emerge midyear, most clearly reflected in the renewed rise in inflation following Liberation Day. At the same time, continuing claims and the unemployment rate moved higher which exactly how the labor market typically behaves as it enters a weakening cycle.

It is still far too early to declare tariffs a net positive or a net negative for the economy. That said, long-time subscribers know I expect them to ultimately prove to be a net negative. Anyone claiming the question has already been “answered” is either misunderstanding the economic mechanics at play or viewing the issue through a purely political lens. Neither approach leads to clear analysis, sound judgment, or profitable decision-making, and therefore has no place here.

At this stage, the thing any level-headed analyst can agree on is that the process has been erratic and remains unresolved as of yet.

Commercial Real Estate

2025 Forecast:

• ~$598 billion CRE debt due for restructuring in 2025; ~$599 billion in 2026

• Only ~15% faces refinancing risk

• Not enough to crash the financial system; hype is overblown

• Regional banks most at risk; larger banks can absorb failed regional banks

2025 Result:

The truth is, this one very fairly straightforward. I included it in the 2025 Forecast not because it was difficult to identify, but to call out the ongoing problem of economic content creators who present themselves as traders or experts without the results or analytical framework to support those claims.

Many of the people who pushed this simple-minded narrative were the same voices that have confidently predicted an imminent housing crash year after year since 2013 or 2017 without ever reassessing their assumptions when reality failed to cooperate.

In reality, CRE turned out to be a non-factor. It did not materially disrupt the system, nor did it meaningfully impair regional banks, despite the certainty with which it was presented as a looming crisis coming into 2025.

What’s concerning is not just the miss, but the pattern. Having moved on from one failed narrative to another, many of these same commentators are now positioning deflation as the next inevitable catalyst for collapse. Doing so without addressing why their prior forecasts were wrong. Their hope is that their audience isn’t smart enough to notice the constant shifting of goalposts and excuse laden nonsense which typically comes down to blaming the Fed rather than their own bad work and half-baked insights.

Bond Yields

2025 Forecast:

• 10-Year Treasury to reach 5.1%, worst case 5.415%-6.0%

• 2-Year Treasury to decline into the 3's, possibly as low as 2.5%

• This divergence is consistent with recessionary conditions

2025 Result:

10-year reached just shy of 5.1% and topped out at 4.8%

2-year dropped into the 3’s and spent the majority of the year below 4. No recession meant no 2.5% yield for the 2-year.

Dollar

2025 Forecast:

• Dollar (DXY) to continue strengthening (bearish signal for economy/markets)

2025 Result:

Ok, so I’m not perfect.

Big whiff on this one as the dollar peaked in the first couple of weeks in January, dropped for the first half of the year, and then stayed in a sideways range for the second half.

That’s ok. It’s probably better for us all if I get a few things wrong from time-to-time. Plus, it was great for markets. Of all the ones to get wrong, I’m glad it was this one.

Mortgage Rates

2025 Forecast:

• Range of 6.0%-7.1% for most of the year

• Could drop to the 5's (possibly 5.3%) if economy rapidly deteriorates (more likely late 2025 or 2026)

• Don't expect 3% mortgage rates again in the foreseeable future

2025 Result:

Topped out just below 7.1% and then faded down to just above 6% to end the year.

Housing

2025 Forecast:

• Modest 2%-2.5% national price growth

• Potential slight decline of -0.5% to -1.5% in 2026

• No housing price crisis on the horizon (those are ~80-year events)

• Active spring housing market could delay recession to 2026; weak spring sales could accelerate it

2025 Result:

2.7% avg so far from Jan-Oct with the data currently available.

Looking ahead, I still expect a modest decline in 2026. That expectation is driven less by broad economic weakness and more by dynamics within the housing market. As transaction activity begins to thaw and home purchases pick up, the real estate industry should start to emerge from what has effectively been a severe three-year recession.

I’ll expand on this in greater detail in the forthcoming 2026 Forecast.

Mass Deportations

2025 Forecast:

• Would exacerbate inflation and could help trigger/deepen a recession

• Unlikely to be fully realized as promised

2025 Result:

As of now, deportations appear to be tracking around roughly 600,000 for 2025 which is largely in line with 2024. In other words, there has been no meaningful surge, and therefore no evidence of a material negative impact on the broader economy.

Additionally, the ongoing economic slowdown is helping to cushion any potential downside. As job openings decline and unemployed workers remain sidelined for longer periods, rising unemployment reduces labor-market tightness. In that environment, the economic effects of deportations are naturally mitigated, rather than amplified.

Event Risk to Watch for at this stage of the cycle.

2025 Forecast:

The key risk to watch at this stage is the collapse of a financial institution.

2025 Result:

This proved to be a significant development, and it further underscores the value of The Economy Tracker. It highlighted stress points early, well before they became obvious to the broader market.

For a deeper dive, I covered this in detail in Cracks in the Credit Cycle: What the Tricolor and First Brands bankruptcies reveal about the next phase of the economy.

The key question now is whether this stress remains contained or begins to spread to larger institutions. For the moment, conditions appear stable. However, this is an area that warrants continued, close observation.

Another Year Beating the Market

2025 was another solid trading year. +90.0% after a +60.72% gain in 2024, and +62.51% gain in 2023.

That said, complacency is not part of the process.

I remain deeply curious, eager to learn, and committed to refining my skills as a trader. Continuous development isn’t optional in this business; it’s the cost of staying relevant.

The goal has never been to “figure it out” once and coast. The goal is to keep sharpening the edge by studying new data, stress-testing assumptions, and improving execution so that when conditions change, we are prepared rather than surprised.

That mindset is what keeps progress compounding. And it’s the same mindset that continues to shape and strengthen The Economy Tracker.

Another Solid Forecast

There was no sophomore slump here. After a strong first year of sharing my work publicly, the follow-through continued this past year.

That said, a few developments emerged that I warned could alter the economic trajectory relative to the 2025 forecast.

Two of which are something to keep an eye on:

• Profit margins remained largely unchanged from last year, suggesting corporate health continues to be resilient.

• Defaults may be starting to roll over. If that proves durable, it would be a meaningful development. However, it is far too early to declare a trend. This is firmly in the “watch closely” category for now.

Overall, the current Credit Cycle is still holding together, though the pace appears to have slowed in 2025. If this persists, it could push a potential recession back from what looked like early late-2025 to early-2026 at this time last year to something closer to Q2 or Q3 in 2026.

Importantly, that is only one possible path. Markets and economies rarely move in straight lines. In the upcoming 2026 Forecast, I’ll lay out a couple of alternative scenarios that could realistically unfold this year.

Be on the lookout for the 2026 Forecast in the coming days.

Hint: expect the volatility to continue with some increasing global chaos mixed in. 2026 looks like it’s going to be a wild one.

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