2025 Crystal Ball Report

Every year as things come to a close, and we collectively take stock of where we are in preparation for what lies ahead, I have found a certain element of joy in the work of putting together my annual Crystal Ball Report. I must confess that I felt a certain satisfaction to reflect on my predictions and learn where I hit the mark, and where I got things wrong. This has always been an enjoyable and enlightening exercise, and I hope it has been equally interesting and entertaining for those of you who read it each year. I will confess that there is not the same degree of buoyancy for me going into this report. There is much uncertainty in our future, the division that has been building in the US and around the globe is showing no signs of relenting, and the deterioration of social and political discourse is something I believe we all need to work diligently to overcome before we truly reach a breaking point, which is fast approaching. With that editorializing out of the way, please join me in a review of 2024 and a discussion of what 2025 is likely to manifest.

First, a review of how I did in 2024:

For 2024, I made these following projections

• Wrong - M&A Markets would recover from 2023 lows, but Q4 would be frozen on account of the election 
• I missed the mark on this with both deal count and deal value down to a ten-year low in 2024

Let’s talk about this for a minute. The market in 2024 was something we have not ever experienced before, so it is worth a bit of analysis. In 2019, M&A markets were at all-time highs, and as is so often the case with bubbles few deigned to believe that this growth would end. Then we had COVID, which messed everything up. The prevailing belief was that once things got open again, we would have a “V” recovery and everything would get back to normal. That prevailing thought process led to a booming market in 2021 and 2022. Then the hangover of reality sank in in 2023. Most of the post-COVID M&A activity was taking place at the edges (either premium operations that found ways to thrive in adversity, or companies with promise, but which were decimated by the lockdowns and available at substantial discounts. By 2023, there were precious few edge companies on the market, but high interest rates and inflationary pressures meant that middle-of-the-curve businesses were not likely to deliver returns that PEGs had committed to their LPs. It will take some time for all parties to find a new equilibrium, and the boom that took more than a decade to build has precipitated a crash that will likely take years to recover.

• Partial - Interest rates will drop, which combined with decreasing unemployment and slowing inflation will work in concert to improve consumer confidence
• While all of the metrics did as anticipated, two factors conspired to keep consumer confidence remarkably low
• These were a failure of ordinary consumer products to come down in price and the continuing burden of individual debt burdens
• As expected, economic conditions were a significant factor in the ouster of the incumbent administration in November

Since individual perception of economic conditions was a primary factor in citizen’s voting decisions, this is worth a bit of a deeper dive. It is a fact that U. S. inflation fell earlier than most of the rest of the G7, and that we maintained strong GDP growth and historically low unemployment numbers. The problem is that our purchasing power has been in steady decline since 2019. That coupled with a dramatic increase in household debt spending since the lock-downs largely overshadows any improvements recognized by the country as a whole. The troubling reality is that current economic conditions are only serving to expand the wealth gap within the country, and the erosion of the middle class is reverberating throughout the fabric of our society.  

• Accurate – I was optimistic that supply chain related backorders and expenses would become a thing of the past in 2024
• In many ways, this was born out in 2024, but we have not yet seen a meaningful impact from the CHIPs act investments

• Accurate - If you will recall, I was pretty down on the 118th Congress for being on track to be the least productive legislature in US history.
• While they improved slightly over 2023 by passing 48 laws, they have earned their place in history for being the least productive group in history with a paltry 82 public and zero private laws passed. Worse, not a single piece of legislature would be considered a truly impactful or legacy proposition.
• To keep things in perspective, the 117th congress passed 362 laws including the CHIPS and Science Act, the THRIVE Act, and the Infrastructure Investment and Jobs Act, all of which had substantial impact on our recovery as well as lasting positive benefits.

• Partial - For 2024, I issued a sincere plea to find a way to return to a society of productive disagreements and outcome-based discourse. I also expressed fear that continued divisiveness and escalation could only lead to increased violence. 
• With all of the attention media and political pundits are giving to violent crime coverage and platforming, it is easy to believe that we have never seen crime rates of this magnitude. The shocking reality is that we have likely never seen crime rates so low.
• In truth, a composite of violent crime throughout the US is about half of what it was in the early nineties per capita.
• With all of this said, we are still sitting on a sociologic powder keg, and the need for productive discourse has never been greater. 

In other words, while I missed the mark entirely on the M&A Marketplace, I was significantly on target with respect to the remainder of the prognostications. While correct in substance, I missed the mark, sometimes by quite a bit, in the net impact of the year’s developments. There are many likely answers for how societies and individuals receive, perceive, and respond to the national and global events that shaped 2024. It cannot be said, however that propagandized news and social media as well as the calcification of entrenched beliefs play an outsized role in our society today. This should be something that all individuals find alarming and work diligently to overcome.

Without Further Ado, let’s pull out the crystal ball and look into the potential for the year ahead.

Before we get into the specifics, let’s talk broad strokes. I don’t think that anyone would argue that we are entering the most uncharted of waters we have faced in decades as a country. Project 2025 lays out an agenda that would systematically dismantle many governmental oversight agencies without putting forward any recommendations for replacements. While written under the auspice of returning government to its constitutional roots, a strict reading of the proposal highlights a clear agenda of restructuring “independent” governmental agencies to fall directly under the control of the president in an unprecedented consolidation of power. While freedom of speech and expression is a core tenet of the constitution, and something that conservatives tout as one of their core driving values, this proposal seeks to pursue massive controls on personal speech and freedom. One example is its proposal of a national pregnancy and abortion database that would help the federal government to “maintain a biblically based, social science-reinforced definition of marriage and family” which feels more than a little Orwellian.  Others include a proposed federal ban on pornography, major overhauls to what is acceptable for school curricula and library inventories, a whole list of terms that would be disallowed in federal regulations. No matter what your views on any of these items are, there is no way to argue that these and many of the proposals found in the 900 page platform amount to censorship and federal controls of personal liberty. I am not sure how much of this agenda will get enacted in the years ahead, but when the party in power publishes a 900 page document outlining its policy agenda, there is absolutely no reason to think that they will not do their best to enact as much of it as they can while they hold a majority. It is imperative that we all think through the outcomes that will be wrought if they are successful.

Combine this with the agenda that President Elect Trump has promised on the campaign trail: tariffs for all nations, tax cuts for corporations and high net worth individuals, massive deregulation, coordinated deportation efforts, and concepts of a plan for healthcare reform. There is much to unpack in trying to prognosticate on 2025, and I simply do not have the ability to address everything. Therefore, please allow me to attempt four major predictions.

Prosperity or not?

In many ways, this is the hardest of all to predict because there are so many conflicting forces at play. Typically, major markets ride high in the first years of a republican-controlled government, and for the most part, I expect this trend to continue for the Trump administration. Corporations and the stock market will likely see the promise of tax cuts and deregulation as causes for optimism, justifying a bullish market. With that said, there are many legitimate concerns that the proposed tariff policy will negate any gains from a tax cut, and since tariffs can be set by executive order, they will likely take effect before any tax reform bills can take hold. That puts the bulk of corporate optimism on the hopes of deregulation. If the Trump administration is able to gain approval for its cabinet picks, there is reason to believe that this will be a top priority, and changes will come swiftly. While this will be a boon for many corporations, the collateral impact may not ultimately help the economy, and will certainly hurt long-term GDP. Furthermore, all of these policy proposals will hurt small to medium sized private businesses, which account for 43.5% of our total GDP and accounted for 62.7% of new jobs created in the past decade.

Finally, there is the matter of mass deportation. The current budget for this effort is $300B, with no clear plan for how it will be funded. Then there is the matter of who will fill the job vacancies, and how that will impact businesses in the US. Here are some hard numbers: the proposal is targeting the forcible extraction of approximately 11M undocumented immigrants, an estimated 90% (9.9M) of these are working for American businesses presently while there are approximately 7M unemployed citizens in the US leaving a 3M employment shortfall assuming that the unemployed citizens can and would take the vacated jobs. Conservative estimates suggest that the overall impact would be a 4.2 – 6.8% ($1.1 – 1.7T) reduction in our country’s GDP. Other losses include the loss of $46.8B in federal taxes, $22.6B in social security, $29.3B in state & local taxes, $5.7B in Medicare, and $256.8B in purchasing power. 

Understand that I am absolutely in favor of immigration reform. The circumstances that make it “easier” to risk your life with coyotes to cross the border illegally, and to live in fear of being identified as an illegal immigrant every single day of your life are without justification. What I am advocating for is the recognition that many people want to have the opportunity to find a better life for themselves and their families by becoming contributing members of the US society. Furthermore, the US economy has a clear need for the workforce and the buying power that these workers bring. If we were to clean up the naturalization process to make it straightforward for the majority of these people to come across legally, we would immediately free up our border patrol agents to only have to protect against those nefarious entities that could not get across by appropriate means. When nobody can get across legally in an efficient manner, we create an environment where good people are forced to desperate measures. 

In total, there is every reason to believe that the Trump administration’s policies will cause prices to increase, many privately held businesses to close, and production to fall. Expect the economy to begin moving toward a recession or depression in the latter half of the year. With increased proposed spending, a proposed decrease in tax levies, and already high interest rates, there are very few levers that can be pulled to stave off a downturn.

Will prices climb?

Expect supply chains to return to the front of business discourse in 2025. Companies are already building up their inventories of overseas goods in an effort to have a time cushion to understand and adjust to whatever tariff policies will be put in pace in January. This has already put a strain on production and logistics infrastructure, and we are already seeing companies backordering many of their products. 

At the end of the day, all costs get passed on to the consumers, and we can expect prices on many consumer goods to begin climbing again in Q1. How far they climb, and how long it takes for markets to find a new equilibrium is anyone’s guess, but I do not see any meaningful easing in 2025.

Going for the record?

For those of you who pay attention to the escapades of our personalities on the Hill, buckle up for a wild ride. We have seen a precipitous climb in the past few congressional sessions of senators and representatives more interested in getting headlines and guest spots on media channels than they are in passing legislation. It will be interesting to see how many of them fall in line to support the aggressive agenda of the Trump administration and the architects of project 2025. While the Republican party holds majorities in both chambers of congress, their majorities are razor thin. They will not be able to overcome any defections or filibusters, which is likely to keep the wheels of legislation spinning very slowly. I anticipate that the 119th congress will more closely resemble the 118th than the 117th with most legislative activity occurring by way of executive order. 

With that said, expect the thrust of the congressional efforts to be focused on immigration reform, deregulation, and tax reform.  I also expect the huge allotments of congressional energy spent on trials and investigations to continue.

Will reunification happen?

As I mentioned in the preamble, I am most concerned about what happens to our society, communities, and the individuals therein. It is not hard to recognize that people are overwhelmingly feeing disaffected and left behind by our government and the machinations of power. News and social media have given everyone a steady diet of propaganda aimed at polarizing individuals on ideological grounds and spreading disinformation that has turned minor divisions into seemingly insurmountable chasms. If prices do climb in 2025 and the economy slumps, this feeling of being left behind by the system will boil over, and individuals are likely to be pushed to the breaking point. If we as a society continue to offload our critical thinking around the causes for the situations we find ourselves in, it is not unlikely that these individuals will coalesce around very extreme courses of desperate action. We have seen this time and time again throughout history, and we are running out of time to get the American populous on a path toward reunification and a consequential positive movement. For this to happen, we must first recognize that as individuals we all want many of the same things; personal security, the ability to strive for and achieve improvements in our quality of life, and the ability to live according to our personal conscience without governmental or social interference. Efforts to curtail these freedoms for any group of perceived “others” in order to strengthen your perceived abilities to achieve these ends for yourself will always end poorly for everyone. This is the True ideal behind the works of our Founding Fathers, and absolutely must be at the center of any discourse about how we should proceed from this moment. Any agenda, laws, or actions that do not carry these freedoms front and center are the antithesis of Constitutionally-minded. 

Every new year brings the idea of endless possibility, and 2025 is no exception. With that said, we all carry a heavy responsibility to think critically about what we are being told and what we really need in order to build a strong future four ourselves, our children, and our nation.