Experts Predict Major Shifts in Economy, Taxes, and Personal Finance by 2025

With a newly elected president, a robust economy, and the rapid advancement of artificial intelligence, Wall Street experts and other financial pundits are speculating about the potential shifts in the economy and personal financial matters over the next year.

Below are some of their predictions:

Impending tariffs introduce significant uncertainty

The President-elect, Donald Trump, has raised the possibility of imposing significant tariffs on a wide array of foreign imports—not only from China but also from Mexico, Canada, and other countries.

The strength and resolve of the new administration in enforcing these tariffs are yet to be seen. These tariffs could potentially spark a global trade conflict reminiscent of the 1930s or could lead to concessions from trade partners.

“Tariffs could particularly disrupt trade flows, diminish domestic demand in the U.S., and lead to inflation,” noted investment firm UBS in a recent analysis. “However, negotiations with trade partners and domestic legal contests could reduce their extent and impact.”

Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, remains cautiously optimistic, particularly regarding how tariff disputes might affect the stock markets.

He estimates a 50% chance that the stock market could perform well in 2025 despite the tariffs, a 25% chance that stocks might rise due to factors like advancements in AI, a 15% chance of a negative impact from tariffs, and a 10% chance of a significant decline due to other factors.

Little relief in sight for the housing shortage

According to J.P. Morgan Private Bank, lower mortgage rates may slightly improve home affordability for new buyers, but significant relief remains unlikely in the near future. The bank estimates a national shortage of between 2 million and 2.5 million new homes.

Affordability varies significantly across regions, influenced by local prices, incomes, and other factors.

For instance, cities like Cleveland and Detroit already offer relatively affordable housing for those who can afford a 20% down payment. J.P. Morgan forecasts that home affordability will improve in Minneapolis by 2026; in cities like Austin, Washington, D.C., Charlotte, and San Francisco by 2027; and in Boston and Portland by 2028. Cities like Atlanta, San Diego, Dallas, and New York might see improvement by 2029.

By 2030, Phoenix, Seattle, Denver, and Tampa are expected to see more affordable housing, followed by Las Vegas in 2031, and Los Angeles in 2032. Miami, however, may not see significant improvement until 2035.

These projections do not account for potential changes in mortgage rates. A decrease by one percentage point could hasten affordability by approximately one year in most of these areas, according to the bank’s estimates.

Unexpected outcomes likely in tax negotiations

The Tax Cuts and Jobs Act of 2017, introduced during President-elect Trump’s first term, is set to expire at the end of 2025. This expiration would revert to previous regulations, generally increasing marginal tax rates for individuals.

With the support of Republican majorities in Congress, Trump plans to extend the act, particularly to maintain lower tax brackets and rates.

However, Trump and the Republicans might face challenges in preserving all aspects of the legislation. For instance, the act restricted certain mortgage interest deductions for higher-income taxpayers and capped state and local tax (SALT) deductions at $10,000 per household.

“Given the narrow margins in both the House and the Senate, compromises, particularly around the SALT deduction cap, may be necessary,” J.P. Morgan suggested.

The electricity sector is poised for growth

Many companies are flush with capital and are poised to invest heavily in new technologies, including artificial intelligence. Yet, J.P. Morgan Chase also predicts a surge in a traditionally less glamorous sector: electricity.

Drivers for this growth include the reshoring of U.S. manufacturing, increased electrification in vehicles, and a soaring demand for data centers, which are essential for storing vast arrays of digital information.

Data centers, growing globally at a rate of about 25% per year, consume substantial amounts of electricity, comparable to the usage of small cities.

While renewable energy sources like solar are gaining traction, J.P. Morgan anticipates an increase in nuclear power generation. For instance, Microsoft has played a role in rebooting the Three Mile Island nuclear plant to power its data centers. The bank also predicts that smaller nuclear reactors and natural gas plants, which can quickly ramp up production to meet peak demands, will continue to play significant roles in the energy mix.

Scams expected to grow more sophisticated and perilous

As financial scams evolve, consumers must stay alert. According to Authority Hacker, a firm specializing in online marketing strategies for small businesses, artificial intelligence-related scams have doubled in the past year, causing $108 million in reported losses, as per data obtained through a Freedom of Information Act request from the Federal Trade Commission.

A particularly concerning trend involves AI scams that create realistic but fake images, texts, videos, or other forms of communication, often impersonating well-known figures to deceive victims.

“As these scams grow more advanced, detecting them becomes increasingly challenging,” Mark Webster, co-founder of Authority Hacker, cautioned. “It’s crucial to verify any unusual requests through reliable means.”

If you are prompted to transfer money or share sensitive information, such as investment details, it’s important to confirm the legitimacy of the request by reaching out directly to the supposed requester. Establishing pre-arranged ‘safe words’ with close contacts can also provide a quick way to verify identities when needed.

Reach the reporter at russ.wiles@arizonarepublic.com.