From global internet outages to another year of 20% stock gains — 6 surprises that could shake up markets in 2025

• There are a handful of things that could shake the market from its expected path in 2025.
• Bank of America highlighted a handful of surprises that could rattle investors.
• The strategists are generally expecting another positive year for stocks, forecasting a 12% gain.

There are more than a few things that could jolt investors in 2025, potentially sparking a big move in markets, according to Bank of America.

In a recent note to clients, strategists at the bank came up with a handful of predictions for events that could disrupt markets this year against an otherwise bullish backdrop.

“The scenarios below are not BofA Research forecasts; but they are high-impact, contrarian possibilities that we believe some investors may not have considered,” the strategists wrote.

Here are six of the biggest surprises Bank of America thinks are possible in 2025.

1. The S&P 500 gains more than 20% for the third year in a row

The S&P 500 could gain another 20% or more in 2025, marking the index's longest streak of returns of that magnitude since the years leading up to the dot-com crash.

Wall Street is expecting more muted returns for the benchmark S&P 500 this year, given that it finished 2024 with its second-straight year of double-digit growth. Forecasters have issued an average S&P 500 price target of 6,539, implying an 8% gain for the year.

Bank of America, meanwhile, forecast the index to end the year at 6,666, implying a 14% upside from current levels.

“However, a productivity boom, corporate tax cuts, deregulation-fueled capex, persistent inflation, inexorable passive fund flows, and few other attractive investment destinations could power stronger earnings growth and steady market technicals, causing another stretch of 20% gains in three straight years,” the bank said.

2. Trump’s tariffs work

Trump's tariffs could successfully reduce other countries' trade surpluses, resulting in a range of positive developments in the US, including a shrinking deficit, increased production, and wages and employment seeing a boost, the bank said.

The strategists added that the value of the US dollar against rival currencies will be a key metric to watch when assessing the impact of tariffs.

“If in coming years, DXY moves towards 90, the 'tough love' scenario will have produced new trade and/or currency pacts and economic peace," the bank wrote.

3. The Department of Government Efficiency sparks an investment boom

The Elon Musk-led DOGE could help fuel a rise in capital expenditures among businesses, if the push for government efficiency leads lawmakers to dial back regulation, strategists said.

The bank pointed to a similar situation that took place in Idaho several years ago, when lawmakers rolled back regulation and caused the state to see the strongest GDP growth in the nation.

The deregulatory push could also be helped along by several recent court decisions, the bank added, pointing to the Loper Bright decision, which overturned the Chevron doctrine, as well as the Corner Post decision, which gave firms more room to challenge old regulations that affect them.

"These shifts in public policy could remove major obstacles to productive business investment," strategists said.

4. AI runs out of data to train itself

Enthusiasm for artificial intelligence could die down if models run out of data to use for training. Companies could exhaust human-generated text to train AI models by the end of this year, BofA said, citing a projection from Epoch AI.

Investors' optimism for AI may also sour if earnings don't hold up.

"Hyperscalers like AWS and Microsoft that are supposed to benefit from record investment in AI are expected to see earnings grow 17% over the next five years," strategists wrote. "But without a 'killer app' or other evidence that past investments are yielding results, earnings estimates could start to fall," they added.

5. Bond market revolt

Bond investors—particularly US households—could refuse to buy US debt securities altogether, BofA strategists said. Such a movement would mark and acceleration of a sell-off fueled by so-called bond vigilantes, investors who temporarily hold off on US Treasuries to influence the government to exercise more fiscal restraint.

"The surprise would be a government disciplined not by professionals or by foreigners, but by a people free to say with Melville's Bartleby, 'I would prefer not to'. Never mind the vigilantes, here are the bond recusants," strategists said.

Investors have already shown some concern over mounting debt levels in the US. The total federal debt is on track to hit $40 trillion within Trump's first 100 days in office, Bank of America previously estimated.

6. The internet goes down around the world

The world risks seeing global internet outages if subsea cables fail. The cables support nearly all global data traffic and are responsible for carrying through around $10 trillion worth of financial transactions each day, the bank noted.

“Some connections are hanging by a thread,” strategists said, noting several incidents of subsea cables being severed over the last 14 months. “Cutting the wrong (or right) cable could mean 'lights out' for key digital infrastructure. The potential impact is serious, and NATO is pursuing stronger controls in the Baltic.”

7. Power outages cost $600 billion

Vulnerabilities in the electrical grid mean the US risks more power outages, which could become costly. Blackouts already cost the US $150 billion a year on average, BofA said, citing estimates from the Department of Energy.

“Aging infrastructure combined with big additions of intermittent wind and solar capacity could increase the expected cost of blackouts by 4x, rising from $5/MWh today to $20/MWh over next decade. A few bad storms and the cumulative effects of mismanagement could cause a year of $600bn losses from grid failure (2% of GDP),” Bank of America added.