Meta Strategy Trading Portfolio – Probability Map Update.

It’s an Expectations Game

Why is my base case for 2025 to anticipate an environment characterized by mean reversion, likely resulting in an overall flattish year with deep corrective periods?

The most convincing data points contrasting 2025 with 2024, as well as 2023, are much higher fundamental expectations for economic growth at the beginning of the year.

For stocks to perform as well as they did over the last two years, a similar upside surprise in growth and earnings would be necessary.

Using three charts I illustrate why that is unlikely and show the historical effect of a change in in the relationship of expectations and real economic results on stock prices.

Extremely good stock market performance invariably results from things turning out to be much better than expected, but for 2025 growth expectations have fully adjusted to the actual outcomes of the last years.