Anti-Predictions 2025: A Better Roadmap for the Year Ahead

By Michael Salvatore, Editor, TradeSmith Daily

Our theme for the past week has been “anti-predictions” for good reason.

2024 taught me that long-term macro-scale predictions are rarely useful.

Most often, they’re a fool’s errand.

Markets simply do not bow to what you think should happen, or when you think things should happen, or why… even if you have perfectly good reasons to think one way or another.

Every good reason in the world won’t stop you from winding up with egg on your face.

The perfect example is my prediction for 2024, issued exactly one year ago.

My big call was that foreign stocks would outperform U.S. stocks. This was based on a few factors: a cyclical regime change that appeared to just be starting, a massive value gap that would presumably close, and a home country bias that would rapidly dissipate in the event of the first two factors playing out.

It was a reasonable analysis. No matter. What we saw was quite the opposite:

• The U.S. stock market dominated on a reigning theme of what we could call “American excellence,” and scarcely any foreign markets outperformed as the S&P 500 put up one of its best annual returns ever.
• The value gap grew even wider. The MSCI ACWI ex USA Index forward price-to-earnings ratio (P/E) went from 12.5x at the end of 2023 to 13.8x today, a rise of 10.4%. But the S&P 500 forward P/E went from 18.7x in 2023 to 21.5x today – a near 15% increase. So, U.S. stocks got pricier faster than foreign stocks. The gap widened by over 25%.
• Anyone already invested in U.S. stocks is hardly in a hurry to leave, as the market has well outperformed the average while most others lagged or even lost money. (This is a more intuitive conclusion, but the price action clearly supports it.)

To my credit, two countries did outperform the U.S. in 2024.

Argentina’s stock market has returned over 60% as of this writing, more than double the S&P 500, as investors got very bullish on President Javier Milei and his aggressive cost-cutting programs.

And China also eked out a win… though largely due to massive fiscal stimulus and the promise of more to come amid an undeniably slowing economy.

Here’s a chart of the SPDR S&P 500 ETF (SPY) versus the Vanguard Total International Stock ETF (VXUS), along with other major foreign stock markets – full list below the chart:

Other foreign market ETFs listed above: Global X MSCI Argentina ETF (ARGT), iShares China Large-Cap ETF (FXI), iShares MSCI India ETF (INDA), iShares MSCI Japan ETF (EWJ), iShares MSCI United Kingdom ETF (EWU), iShares Europe ETF (IEV), iShares MSCI South Korea ETF (EWY), and iShares MSCI Brazil ETF (EWZ).

There’s a four-egg omelette on my face in the form of the pitiful 2.76% return VXUS saw in 2024. That was what you earned fading the U.S. in 2024. Basically a real return of zero.

India, Japan, and the U.K. posted average to middling returns at best. Europe, South Korea, and Brazil all lost money.

There’s a chance the next week and change of market action proves me right – I’m writing this on Dec. 23 – but I highly doubt it.

So what have we learned?

1. Predictions of such a scale are really, really difficult to get right.
2. Betting against America, so to speak, is even harder.

And now, in a new Trump presidency, with renewed hopes of U.S. dominance along with a general expectation of volatility… This kind of trade really isn’t one to follow.

Thankfully, this isn’t the only trade we talked about in 2024.

Regular readers also learned early on about the inevitable bull market in nuclear energy stocks, the bitcoin-dominant rally in crypto markets, dozens of high-quality Power Factor stocks that have beaten the market, the last-inning small-cap surprise, and so much more.

So here we are, the first day of 2025.

What’s my prediction?

You’ll not be so surprised to hear I don’t have one.

But I do have something far better.

I have a way to put the odds on your side on dozens, if not hundreds of trades throughout the year.

It has to do with my absolute favorite TradeSmith software tool, seasonality…

A Roadmap for 2025

For the uninitiated, seasonality is the simple study of past price action and probabilities as a factor for trading strategies.

Here at TradeSmith, we have long-term price data for thousands of stocks and ETFs. When you take all that data and average it out on an annual basis, you get something of a blueprint for when each asset will move, how strong the move will be, and the likelihood that the move will match history.

For the next few days, we’re giving all of our readers free access to seasonality charts of their stocks when they register for our upcoming webinar on the subject.

Take this chart of Tesla (TSLA), for example…

Rather than a current price chart, the teal shaded line below is an average of TSLA’s annual price action as a public company going back 14 years. And the green and red shaded areas are times where TSLA has an 80% or better hit rate of moving in one direction or another during that time:

From May 22 to July 1, the time span highlighted above, TSLA has moved higher 100% of the time in its 14-year history, for an average return of 18%. In 2024, TSLA did indeed rise through this period – about 16.5%.

And here’s a chart for the broad market using the SPY ETF, which has a 100% bullish window of its own in July (and another starting in late October):

Every stock or ETF you plug into our software will come back with a chart like this: a composite of that asset’s price action.

It defaults to 15 years (or less, if the asset is younger), but in the full version of the tool for Trade Cycles subscribers, you can extend that for as far back as we have data. You can also select for what year in the presidential cycle we’re in – with 2025 being a post-election year.

Using this data, you can find opportunistic times to trade certain assets at certain times.

And with another powerful TradeSmith software, the Screener, you can make your search much easier.

Here’s a Trade Cycles screen I recently set up to look for seasonal opportunities:

This screener will return all mid-, large-, and mega-cap stocks with a seasonality pattern accuracy rating more than 80%, with an average return above 5%, set to begin this year, and during post-election years. Here are the top 10 results:

This list is sorted by the number of valid seasonality patterns given our criteria. Let’s go ahead and click on United Airlines (UAL):

And just like that, we have a blueprint for trading UAL to the upside all through 2025.

In fact, starting today through Feb. 25, UAL has a tendency to rise more than 6%, and has traded higher 13 out of the past 15 years.

When you have software like this, you have to ask yourself… Why would you pin yourself to big macro predictions?

Which would you rather have? A prediction… or a trading plan just like the above for every stock tracked in our system?

The answer is clear. Seasonality data is a better, more reliable, and far more tradeable tool than any market prediction.

And if you can make a whole lot of money using seasonality data to trade just one stock during the optimal times throughout the year…

Imagine what you can do with an algorithm that continually spits out the top seasonality trades at any given time.

And that brings us to something really special we’re set to release to our Trade Cycles and Platinum members.

It’s our biggest breakthrough in 20 years, and it could be the key to beating the market by more than double in 2025.

Our New Seasonality Strategy

TradeSmith CEO Keith Kaplan will be debuting a powerful new trading strategy based on these bullish seasonality windows in his webinar next week…

But not just any seasonal opportunity qualifies for this new strategy.

We had our algorithms run millions of backtests, applying different indicators to confirm the best seasonal trades. In the end, one simple yet elegant strategy won out – and outperformed the market by more than 2-to-1:

And starting here in January, we can use it to foresee the biggest jumps on the most reliable seasonal stocks, to the day, with 83% historical accuracy.

We’ll be pinpointing dates of the calendar when certain stocks shoot up – year after year – producing one winning trade after another, much like I showed you with TSLA earlier.

We’ll let subscribers know very soon which stock is the first to qualify for this strategy in 2025.

In the meantime, be sure to reserve your seat at Keith’s free webinar on Jan. 8, Breakthrough 2025, and try the free version of these seasonality charts for yourself.

To your health and wealth,

Michael Salvatore
Editor, TradeSmith Daily