Three Reasons Why the 2025 Market Rally Could Get a New Lease on Life

Markets have been through recent turbulence, but beneath the volatility lies a compelling case for optimism as we approach year-end. While concerns about economic uncertainty have weighed on sentiment, three structural tailwinds suggest the pullback may be temporary rather than transformative.

When Central Banks Move, Money Follows

Stanley Druckenmiller, one of finance’s most decorated investors, has consistently outperformed across decades by following one principle: “Earnings don’t move the overall market; it’s the Federal Reserve Board…focus on the central banks, and focus on the movement of liquidity.” His track record speaks volumes—generating positive returns for over 30 years with minimal drawdowns.

The December rate decision has become a focal point. Despite earlier uncertainty stemming from incomplete economic data during the government shutdown, the probability of a 25-basis-point cut has solidified. The CME FedWatch tool, which analyzes fed fund futures, currently shows an 82.7% probability of a December cut. On Polymarket, one of the largest prediction markets globally, that odds sits at 86%. Such convergence between futures and betting markets signals high conviction among market participants.

For investors focused on liquidity flows—as Druckenmiller advises—a Fed pivot represents a critical turning point that historically precedes renewed market strength.

Pullbacks Are the Rule; Bear Markets Are the Exception

Peter Lynch, the legendary Magellan Fund manager, observed that “far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” This wisdom remains instructive.

Since 2009, the market has experienced 31 corrections of 5% or greater. Yet only four of those evolved into true bear markets—defined as 20%+ declines. The majority resolved themselves within the 5-6% range. This historical pattern suggests that current weakness, while uncomfortable, falls within normal market mechanics rather than signaling structural damage. Distinguishing between routine profit-taking and systemic deterioration is critical for maintaining composure during volatile periods.

The AI Accelerant and Consumer Stimulus Pipeline

Two powerful catalysts are emerging on the policy front. President Trump’s recent AI executive order—framed with Manhattan Project-level urgency—signals aggressive government backing for artificial intelligence infrastructure. This represents a significant tailwind for technology and semiconductor players.

Concrete evidence is already surfacing: Amazon announced plans to deploy up to $50 billion into AI infrastructure supporting U.S. government initiatives. This capital deployment creates a multiplier effect across the AI supply chain, benefiting semiconductor manufacturers like Nvidia, AMD, and infrastructure specialists such as Bloom Energy and CoreWeave. When megacap technology companies announce multi-billion dollar investments, it typically triggers cascading positive momentum through related sectors.

Additionally, the Trump administration is reportedly preparing “Tariff Dividend Checks” directed toward lower and middle-income Americans—echoing the $2 trillion stimulus disbursed during COVID in March 2020. That earlier round of government checks coincided with explosive market gains. Consumer-driven fiscal support could provide another layer of demand support heading into 2025.

The Verdict

Recent market weakness has rattled confidence, but the underlying architecture points toward strength. A highly probable Fed rate cut in December, historical evidence that corrections rarely become bear markets, and twin catalysts from AI investment alongside fiscal stimulus create a constellation of positive factors. Rather than viewing the pullback as a warning signal, investors might interpret it as a final capitulation before the next leg higher.