Last year, 2024, the S&P 500 was famously up 24% on December 6 – that was the day the index hit the highest level of the year. Just a little less famously, the S&P 500 was up 19% the year before, in 2023.
If you asked me, I’d say the 2023 performance should be the more famous of the two. And that’s because a significant portion of the Wall Street strategists crowd thought there was a pretty good chance of a recession in 2023.
Actual recessions are kind of a big deal…
The average decline for the S&P 500 during a recession year is 30%. And there have only been 15 recessions in the last near-century (since 1929). That’s 3 recessions every 25 years, so the current century is right on track.
Given that we’re right on the historic track for recessions, maybe there was some wishful thinking by the bears about 2023. A fourth recession in 25 years would be unusual…
More likely, after Covid spending helped the S&P 500 launch 33%(!) in 2021 and then Covid spending inflation flipped the script and tanked the S&P 500 by 22% in 2022, some recency bias was in play.
It's understandable, I suppose, but recession forecasts shouldn’t be made lightly. Recessions are rare — they tend to be triggered by a shock to the economy. To get a recession, consumer spending has to fall. Which if you understand the American consumer, that’s also a rare event.
Even so, the 2023 recession calls were made. But instead of a 30% decline, the S&P 500 actually rallied by 19%. That is a significant outperformance, compared to what might’ve happened…
That’s why I vote for 2023.
If there was an agreed-upon metric for how much better than expected one year’s market performance was, 2023 would score very highly. American exceptionalism was on full display as the Fed cranked rates higher and higher and the labor market never blinked.
All of this is why Wall Street strategists prefer to quote the average gain for the S&P 500 over long periods of time – 9.75%. It’s just easier.
And it’s why, come prediction time in December, Wall Street strategists' forecasts for the coming year usually don’t deviate much from that 9.75% average gain…
Sure there’s a little CYA involved (or maybe a lot). But there’s also some realistic acknowledgment that a lot of stuff can happen over the course of a year, and trying to account for it all is hard.
And besides that, most investors are retirement savers. They’re investing through an employer-sponsored 401K plan, they mostly own S&P 500 index funds, and they mostly don’t trade in and out of those funds frequently, so if the market goes up 24% instead of 9.75% they’re all along for the ride anyway…
So maybe those annual forecasts are kind of just for fun?
But if that’s true: is a prediction for a 9.75% gain really all that fun?
I’d say it’s not…
Not Fun At All
I’d say it’s a lot more fun to push the envelope a little, combine a sense of history with a little imagination to add some color to regular old good analysis and predict some longshots – of course with the caveat that this is not investment advice per se, that individual investors should not trade in and out of their 401K funds based on this forecast, but at the same time, the logic is sound and markets always do unexpected things, so if you wanna speculate and throw a couple grand at the fun idea, go ahead.
If I had to guess, I’d say this is why you read Outsider Club. Not just for the fun – of which there is obviously a lot – but also for the color Hammer and I bring to our analysis, the sound logic, our history — but maybe most important of all, the fact that we embrace the idea that the market will do unexpected things.
It probably wouldn’t matter how fun Hammer and I are, if we told you “this stock looks like a solid investment that we expect match the S&P 500’s 20-year average gain of 9.75%,” you’d probably unsubscribe pretty quick…
And really, if Hammer and I continued to be very fun, told you about plenty of stocks that would do much better than the S&P 500’s 20-year average gain of 9.75% but then all of the stocks we told you about did poorly or even lost money, again with the unsubscribe button.
Fortunately for all of us, neither of these hypotheticals is the actual state of things.
Hammer and I have a combined 57 years of investing and trading experience. We know the market (and individual stocks) will do the unexpected. In 57 years, you learn some things about what the unexpected looks like, and how it plays out. Combine sound logic, real analysis and some imagination and we routinely find big winners to share with you…
The fun we’re all having is just gravy…
By now, you probably know that my prediction for the S&P 500 missed by a measly 21 points (because I keep writing about it). In December 2023, I wrote that the S&P 500 would hit 6120 in 2024. The actual high was 6099.97. I was the most bullish in the known universe… and also the most accurate.
So for 2025, I decided to really go out on a limb, and give you one stock that would double your money in 2025. It was December 19, 2024. And I wrote:
Best Bet to Double Your Money in 2025 is….
We’ve written a lot about small modular reactor (SMR) stocks at Outsider Club. The first was NuScale (NYSE: SMR) at $6 a share back in June. We’ve written about Nano Nuclear (Nasdaq: NNE) and Oklo (Nasdaq: OKLO).
Each of these companies has a very clear path to deployment and will be helped by regulatory changes that are likely under the Trump administration. NuScale and Oklo each have market caps around $2 billion, and Nano Nuclear is $800 million – they are all still small enough to have substantial upside.
NuScale was the first SMR stock I recommended and you always remember your first with extra fondness. But there can only be one. So the best pick to double your money is the one that’s backed by ChatGPT co-founder Sam Altman – that’s gotta be a marketing edge, doesn’t it? So my top pick to double your money next year is OKLO (Nasdaq: OKLO).
Oklo closed at $21.85 on December 19. Today it is over $45. 4 days into February and I have fulfilled my promise to you.
Isn’t this fun?
Seriously though, I didn’t think Oklo would launch this far this fast. Unexpected, right? If you bought Oklo at $21.85, you should sell at least half now. If you want to let some shares ride, play with house money, that’s fine. But you should put a mental stop loss at $42.50.
Cheers,
Briton Ryle
Chief Investment Strategist
Outsider Club
X/Twitter: https://twitter.com/BritonRyle
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