We are well underway into the new year and into New Year’s Resolutions. As I’m sure you already know, some of the most popular ones are to exercise more, eat healthier, lose weight, spend more time with family, and quit smoking or other bad habits. But the number one most popular resolution according to a 2024 Statista Poll is to save more money with 21% of people surveyed picking that as one of their resolutions.
With the new year also comes big changes politically, and possibly, changes in tax policy as well. A lot of our clients have asked our thoughts on the markets for this year, especially given so much change and coming off back-to-back 20%+ gains in the S&P 500. The good news is that, even though the S&P 500 is a little over its ski’s, historically it has done well during the first year of a president’s term, unless there is a recession. https://www.bairdwealth.com/insights/market-insights/baird-market-strategy/2024/12/in-the-markets-now-2025-things-for-2025/
Some of the other areas that we are watching and that could influence the markets this year are geopolitical risks, tariffs, government debt, both in the United States and globally, and changes to immigration policy among others. On a more optimistic front, we still have a strong labor market, inflation has come down although it is still sticky, and artificial intelligence (AI) and new advances in technology are increasing productivity and raising projected earnings for businesses.
2024 also marked the start of the Fed’s rate cutting cycle. After 11 rate hikes from March 2022 to July 2023, the Fed cut interest rates in September, November and for a third time at their December 18th meeting. But at that meeting, they also forecast two fewer rate cuts in 2025 than they had previously suggested. The markets reacted negatively to the Fed’s comments and pulled back significantly, 2.5% on that day.
As always, we are keeping an eye the areas mentioned above so that we can adjust, if needed, your portfolios. But it is important to stay focused on your long-term time horizon and your goals so that you don’t make short term mistakes that could have long term consequences.
Here is a Quarterly Market Update by Strategas, Baird’s macro research partner which gives additional insight into the markets going into 2025. https://www.bairdwealth.com/siteassets/pdfs/market-insights/qmu-4q24.pdf
We hope you have a safe, healthy and blessed 2025.
Kurt, Jean, Anders, Maggie & Molly