The market’s blistering postelection rally has some on Wall Street sounding the alarm for 2025

The postelection rally in the stock market is running hot into year-end, but investors shouldn’t abandon all caution as they chase the gains.

Some forecasters see the stellar rally since the November 5 election as cause for concern, with the record-setting run in the stock market signaling that a correction could be in store as soon as early next year.

Among the bears is BCA Research, which said recently it sees stocks tipping into a bear market in the first half of next year, with equity prices potentially plunging as much as 35%.

Lingering risks in the economy are a big threat to stocks, the firm said in a recent note. Consumer spending looks to be slowing, with shoppers increasingly looking for bargains at places like Target and Walmart. Other areas of the economy, like the job market, are also softening, they said.

“Although we believe a 2025 recession is more likely than not, risk assets could disappoint even in the absence of a recession, and current prices do not augur well for future returns,” the firm wrote.

“We nonetheless expect an equity bear market will unfold sometime in the first half and will be looking for an opportune entry point to position against equities if our stop is triggered. We will be eager to narrow the underweight soon after the 20% bear-market threshold is reached and will likely look to overweight equities around -30% to -35%, if they fall that much.”

Others on Wall Street have taken a bearish view simply given the fact that valuations are historically high. Since 1928, in years when the S&P 500 has hit at least 50 record highs, the median return for the benchmark index was -6% the following year, according to an analysis from Ned Davis Research.

The S&P 500 notched its 57th record high of 2024 last week.

“The obvious challenge to momentum studies is that stocks do not go up forever,” strategists at the firm wrote, adding that market concentration narrow would set stocks up for a weaker 2025. “Perhaps AI will drive another productivity and profit boom that will keep inflation and Fed policy benign. History suggests that is the exception rather than the rule.”

Investors should consider taking some chips off the table at the end of this year, according to Andrew Slimmon, senior portfolio strategist at Morgan Stanley.

“The stock market is being led by bubbly, low-quality, growth stocks,” Slimmon said in an interview with CNBC this week, adding that the current investment environment looked similar to 2021. “That didn’t end well for those stocks. I just think right now, in December, it’s time to put a stake in the ground and say it’s over. I think it’ll continue, but be wary of what could happen next,” he said.

“There are a lot of stocks up over 50% this year, 60%, 70%. So I think it’s prudent to trade out of those and look for areas that have lagged.”

Most forecasters on Wall Street are generally bullish for 2025, though they see a more muted year compared to the huge gains in 2023 and 2024. Barclays, Bank of America, and Goldman Sachs are calling for a 10% return next year for the S&P 500 next year. The benchmark index is up about 28% year-to-date.