The S&P/ASX 200 Index (ASX: XJO) is down 0.6% to 8,280.2 points on Friday.
Only a few ASX stocks are enjoying decent gains today.
Iress Ltd (ASX: IRE) shares are leading the ASX 200 today, up 8.48% to $9.40.
Insignia Financial Ltd (ASX: IFL) is next, up 8.24% to $3.68 per share.
ASX uranium stock Paladin Energy Ltd (ASX: PDN) is up 5.14% to $7.98 per share.
Meantime, top broker Morgan Stanley has issued its new year forecast for the ASX and our economy.
Let's check out the details.
Will the ASX 200 keep rising in 2025?
According to Morgan Stanley, the short answer is yes — but not by much.
The ASX 200 has risen by 8.6% in the year to date (excluding dividend returns of usually ~4%).
Morgan Stanley sees a more subdued rise ahead. The broker predicts the ASX 200 will be trading at about 8,500 points by this time next year. Based on the index's current value, that's only a 2.65% rise.
The broker said:
We expect a similar scenario for Australian equities in 2025 as seen this year: a positive outlook although likely to lag behind major Developed Markets, particularly the US.
Our strategists have raised their year-end 2025 price target for the ASX 200 to 8500 after lifting the base case multiple to 17.0x and forecasting a return to 10% earnings per share (EPS) growth in 12 months time.
However, for any meaningful upside from here, earnings trends need to start to improve.
In terms of commodities, Morgan Stanley expects lower crude oil prices in 2025 due to rising supply from both OPEC and non-OPEC producers and slowing demand growth.
Copper is the broker's top metals pick for the new year due to recovering demand and falling inventories.
The broker sees "limited upside for gold" despite the usual tailwind of interest rate cuts, with signs that physical demand is already beginning to soften.
Australia's economy will 'muddle through' in 2025
Morgan Stanley is tipping gradual improvement in our economic growth, but it will remain below trend.
While households' real incomes are likely to increase due to lower taxes and inflation, we anticipate only a modest impact on spending as consumers remain cautious.
Savings rates are expected to rise slightly as house prices stabilise and household wealth flattens.
Morgan Stanley says a reduction in migration back to pre-COVID levels will create a headwind for service exports and domestic demand.
The broker expects government spending to continue underpinning much of our economic growth, especially with an election coming in the first half of the year.
Government spending remains a key growth driver near-term in Australia.
The labour market remains strong and we expect this to continue through the first half of 2025, with solid but slowing job growth, largely driven by government policies.
Alongside some assumed increases in participation, the unemployment rate is expected to rise only gradually.
Morgan Stanley expects inflation in Australia to continue its gradual downward trajectory.
While wage growth has peaked, it is projected to stabilise around 3.5% in 2025, which will limit disinflation in services, especially as productivity remains weak.
In this environment, our economists anticipate that the Reserve Bank of Australia (RBA) will lag behind other central banks in easing over the next six months.
The first interest rate cut is expected in May 2025, after the Federal election. This is projected to be followed by two more rate cuts in August and November, bringing the cash rate down to 3.60% and close to the RBA's neutral rate estimate.
