Stock Market Outlook: February 2025

What could end this bull market?

We are nearly two and a half years into a bull market in stocks. The S&P 500 index has risen by more than 60% since its last bear market bottom in October of 2022.

Based on historical data, it could run a lot higher, as we mentioned in our last issue. According to research from investment banking firm Stifel, from 1932 to 2023 the average S&P 500 bull market lasted 4.9 years and had a cumulative return of 177.6% ^[0]

But that’s just the average length of a bull market. This one could be longer – or it could be shorter. Below, we’re looking at some threats that the bull market may face in the coming year.

Weak earnings

Gene Goldman, a chartered financial analyst and the chief investment officer of Cetera Financial Group, noted in an email interview that the 10 largest stocks in the S&P 500 make up 38% of the index by market capitalization.

“One disappointing earnings report could have significant effects on market returns,” Goldman said, especially given the high price-to-earnings (PE) ratio of many large-cap stocks.

Many large companies are expected to report earnings in February, including several Magnificent 7 tech companies such as Alphabet (GOOG), Amazon (AMZN) and Nvidia (NVDA). Worse-than-expected quarterly results from these big tech stocks could roil markets.

Higher-than-expected inflation and interest rates

On Dec. 18, 2024, Federal Reserve Chair Jerome Powell said that the Fed expects to cut interest rates by just 0.5% this year, down from a previous expectation of a 1% cut over the course of 2025. The market reacted very negatively to the prospect of higher-for-longer borrowing costs; the S&P 500 fell nearly 3% on Dec. 18.

The Fed is slowing the pace of interest rate cuts to fight inflation, which may not be behind us just yet. In December, Fed projections suggested that the inflation rate may stay above its 2% target for much of this year. Goldman says higher-for-longer inflation and interest rates could put pressure on stocks in several different ways.

“A pause in Fed rate cuts could keep borrowing rates higher-than-expected. Second, rising bond yields on higher inflation expectations and economic growth could also keep borrowing rates high. Higher tariff-induced inflation could act as a double-whammy by causing the Fed to pause and push bond yields higher,” he said.

The next Federal Reserve interest rate decision is expected on March 19, at which time investors will get a fresh set of economic projections from the central bank. If the Fed continues to project high inflation and interest rates this year – or gets even more gloomy in its outlook – that could be bad for stocks.

AI shenanigans

On Jan. 27, the S&P 500 fell nearly 1.5%. The Nasdaq composite tumbled nearly 3%, with AI stocks leading the decline. Nvidia shares fell nearly 17%.

The selloff was sparked by the launch and sudden popularity of a new AI assistant from Chinese startup DeepSeek. U.S. export controls bar Chinese firms from purchasing American-designed AI chips, such as those from Nvidia, which have generally been viewed as a crucial ingredient in cutting-edge AI projects.

But DeepSeek’s AI models – which were ostensibly developed without those American chips – rival the capabilities of models from American AI labs such as OpenAI and Anthropic. That calls the value of chipmaking stocks such as Nvidia into question.

It remains to be seen whether DeepSeek will stay at the forefront of AI development, but the incident illustrates how much of the U.S. stock market is riding on AI stocks. Any unexpected news about global AI development could bring volatility to the market.

How should investors prepare for the next bear market?

Regardless of whether or not the current bull market survives these challenges, Goldman said that a well-rounded investment portfolio is one of the best ways for long-term investors to stay ready for the uncertainties of the future.

“Corrections and market volatility are a normal part of investing. In order to stay focused on the long-term, smoother portfolio returns tend to reduce investor angst and ill-timed market timing. Diversification can help smooth portfolio returns,” Goldman said.

» Need help building a diversified portfolio? Check out our list of the best robo-advisors.

Term of the month: Pump-and-dump

On Jan. 18, two days before his inauguration, President Trump launched a cryptocurrency bearing his name: Official Trump (TRUMP). The coin quickly soared in value to a market capitalization of roughly $14 billion.

However, shortly after the inauguration, blockchain data revealed that several large TRUMP holders had sold millions of dollars worth of the coin, precipitating a selloff that has brought the coin’s market cap down to roughly $5 billion.

In a Jan. 22 letter to the Treasury Department, the Senate Banking Committee expressed concerns about the ethics of Trump’s latest crypto venture, quoting finance journalist Jacob Silverman, who called it a “classic meme coin pump-and-dump ^[0]

But what is a pump-and-dump, exactly? And is it an accurate description of the TRUMP coin?

What is a pump-and-dump?

A pump-and-dump is an investment scheme in which a group of people “pump” the price of an asset that has little intrinsic value, such as a meme coin or a penny stock, by spreading hype about it on social media or other mass-communication channels to create a buying frenzy.

Once enough “outsider” investors have bought into the asset, the “insiders” of the scheme — who own substantial amounts of that asset — “dump” their holdings at the high, hype-fueled price.

These sales often crash the price of the asset, and that crash generally takes the outsiders by surprise. It often ends with them owning an asset that is worth less than what they paid for it, or selling it for less.

Today, pump-and-dump schemes are mostly associated with cryptocurrency, where they’re also known as “rug pulls.” But historically, pump-and-dumps often involved small-cap stocks instead. The film The Wolf of Wall Street is the true story of Jordan Belfort, a former stockbroker who ran pump-and-dump schemes on penny stocks via an extensive cold-calling sales operation.

Belfort’s activities eventually drew the attention of regulators such as the Securities and Exchange Commission, leading to his conviction and imprisonment for fraud. Crypto markets, which are less regulated than stock markets, offer today’s Belforts less risk of getting caught.

How to avoid getting caught up in a pump-and-dump

“The number one way to avoid rug-pulls in crypto is to avoid investing in anything other than Bitcoin,” Alexander Blume, CEO of Two Prime, a digital asset-focused registered investment advisor, said in an email interview. That’s because Bitcoin, he said, is the most established cryptocurrency.

“If trading trending cryptocurrencies, just understand you are gambling. If one must do this, then coins that have been around longer and have large market caps are less likely to completely rug-pull. This includes coins in the top 25 on coinmarketcap.com,” Blume said.

According to Blume, some red flags of a crypto pump-and-dump scheme include high concentration of ownership, vague plans for the future, and listings on low-quality crypto exchanges. Investors can avoid the last of these by sticking to a reputable centralized exchange such as Coinbase, Gemini, Kraken or Crypto.com.

“You should also be wary if a token creator uses a lot of tech jargon to seem intelligent and speak over the heads of regular people — that's another sign of a likely scam,” Blume said.

Is TRUMP a pump-and-dump?

Not quite. The story of TRUMP does have elements of a pump-and-dump scheme. The coin was promoted on social media — specifically, by the incoming president posting about it on his X (formerly Twitter) account — which looks a lot like a pump ^[0]

And a few days after Trump’s X post, a group of major investors in the coin sold large volumes of it in a short span of time, which could arguably be described as a dump.

However, a typical pump-and-dump scheme involves the instigator of the pump (who is typically also the largest owner of the asset) dumping their position. In this case, that would be President Trump himself, whose Trump Organization owns 80% of the supply of TRUMP coin and who initiated the buying frenzy with his social media posts.

But the Trump Organization hasn’t sold its stake, which makes it difficult to accurately describe the recent rise and fall of TRUMP coin as a “classic meme coin pump and dump” as Silverman did.

However, the coin bears several resemblances to a pump-and-dump scheme, such as high concentration of ownership and a lack of plans for the project’s future. It could quickly turn into a pump-and-dump in the future if the Trump Organization sells its stake without warning.

The price of TRUMP, although below its all-time highs, is still up more than 200% from its initial offering price. The Trump Organization’s stake is subject to a two-year lockup period; it cannot be sold before then.

CIC Digital, the Trump Organization affiliate that launched the coin, has described TRUMP as an “expression of support” and not as an investment.

» Looking to invest in established cryptocurrencies? Browse our picks of the best crypto exchanges and apps.

Dates that could move markets this month

Economic events

• Friday, Feb. 7: Bureau of Labor Statistics monthly employment report. A report showing hiring levels and various measures of the unemployment rate. 

• Wednesday, Feb. 12: BLS consumer price index (CPI) report. A key inflation gauge. The employment and CPI reports could give investors hints about what the Federal Reserve will do with interest rates in future meetings; unexpectedly high unemployment or low inflation could indicate that rate cuts are on the way. 

• Friday, Feb. 21: Michigan consumer survey data for February. The University of Michigan will release its data for this month’s survey on Feb. 21. The survey has become a closely watched indicator of ordinary Americans’ perceptions of the economy.

• Friday, Feb. 28: Federal Reserve Bank of New York R-star estimate. The “natural rate of interest,” or R-star, is an important indicator of the future trajectory of interest rates.

Earnings

Below is a table of blue-chip stocks that are reporting earnings in February, with the expected dates and average analyst estimates for their upcoming earnings reports.

We've filtered the list for companies with a market capitalization of at least $250 billion. These are high-volume stocks whose earnings reports are often major trading events for options traders and day traders.

No data above? Log in or register for a NerdWallet account to see the full earnings calendar.

Source: Nasdaq.com. Data is current as of Jan. 22, 2025, and intended for informational purposes only.

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