Heres my surprise prediction for the stock market in 2025 and pessimists worldwide should pay attention

Last month, during the thick of the holidays, I found myself in a rare though not totally unprecedented predicament: I wasn’t sure which way to bet on the stock market in the year ahead.In my December column, I told you there were three possible 2025 outcomes – all of them seemingly likely, and to a vexingly similar degree.I also told you that I’d come back to you when I could conclude which is, in fact, the most likely.Well, I’m back – and with an answer that has surprised me in more ways than one. Recall the three possible outcomes I had outlined: A minor decline, a small single-digit positive year, or another big year like 2023’s and 2024’s gains.

I also said the latter was the least expected and would shock the most people because three big years in a row is legendarily rare.  Now, I dare say – brace for the legendarily rare.That’s because I believe that what is most likely is a stock market gain of 15% to 25% – maybe slightly bigger. There is, however, also one major twist here that came even less expected for me – and which hence may be even more universally shocking.

The twist is that European stocks should lead, quietly but strongly, as my forecast above is for the MSCI World index.The S&P 500 should lag Europe.  What has changed since year-end?  As I said then, I would keep researching for signs of sentiment that would swing direction and that the swing would happen soon.I also told you that US investors were optimistic while foreign ones were pessimistic. As it turns out, the overseas pessimism is extreme – vastly more depressed overall than Americans are optimistic.

Hence, even a moderate year for foreign GDP, particularly European, would lead to huge positive surprise for them.They’re just more sensitive right now. Decades ago, behaviorists proved American investors hate losses more than they love comparable sized gains – about 2 ½ times as much.

My former research partner Meir Statman and I then deployed t...