2024 was another banner year for the U.S. stock market. The Standard & Poor’s market index of 500 companies went up 25%, while the aggregate index of bonds only went up 1.25%. Gold went up 26%, and oil prices rose 14%.
This time last year, we wrote, “With the Federal Reserve pivoting to reducing interest rates this year, economic growth still looking positive and corporate profits estimated to increase 11.5%, the tailwinds for a positive year are with the stock market.” Fortunately, that statement proved accurate.
So, what will the economy and markets do in 2025? One can never know for sure, but current trends suggest continued economic growth that could help corporate profits grow more than 10%. If Congress enacts the Trump tax cut plan, economic growth, corporate profits, wage gains, and consumer spending could all experience a serious boost, leading to new heights for the stock market.
However, don’t be surprised if the markets consolidate gains from the previous two years in the short term. Prices (valuations) have gotten ahead of corporate profit growth, potentially signaling inevitable market fluctuations before the next leg up. The median performance of the stock market after so many record highs were set is -3.5%.”
Many of us who believe in free markets and the Trump agenda of lower taxes, less regulation, and lower energy prices feel optimistic about America’s growth projection. The markets, however, have already priced in some of the Make America Great Again agenda items. While Congress takes on the challenging process of delivering the agenda, don’t be surprised by some up and down action in the market. The legislative sausage-making process can be unpleasant to watch and generally leads to periods of uncertain results.
We share the optimism and hope that the current bull market trend lasts a few more years. But be sure to talk to your financial advisor about the correct investment strategy for you, and have a blessed and prosperous new year!
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