Daryl Marsden
Investment Advisor
Happy New Year! As we step into 2025, we want to take a moment to reflect on 2024 and share our thoughts on the year ahead. This update provides a summary of market trends, highlights from the past year, and a forward-looking perspective in 2025.
Attached is a thoughtful market commentary from our affiliated sub-advisor, Stratos Investment Management, offering their perspective on recent market trends and strategies as we look forward to the months ahead. We hope you find this update helpful and insightful as we continue to navigate the markets together.
2024 Highlights
- The S&P 500 delivered over 20% returns in 2024, with performance driven by the “Magnificent Seven” (Mag-7)1 stocks, which averaged a 63.1% return. Despite hopes for broader market participation, the year remained defined by the outsized gains of these top performers.
- The U.S. economy showed resilience in 2024, with consumer spending rebounding after a January dip. Inflation, measured by the Core PCE Deflator2, remained above the Federal Reserve’s 2% target but showed signs of progress. The Fed, responding to economic conditions, cut rates three times during the year, focusing on job market stability despite no clear signs of a recession in broader data.
Outlook for 2025
- Economic Growth and Inflation: The U.S. economy is expected to continue growing at a pace of 2.3% to 3.2% through 2025. While inflation is still above the Fed’s target of 2%, the central bank is adjusting its approach, potentially accepting 3% as the new norm. This could guide monetary policy moving forward.
- Federal Reserve Policy: The Fed has already cut rates three times in 2024 and is expected to proceed cautiously with further rate cuts in 2025, with the Fed Funds rate potentially decreasing by 50 basis points. They will likely maintain a balanced approach between price stability and full employment.
- Federal Budget and Debt: The growing U.S. national debt is a concern, with debt service costs rising significantly. While this is manageable as long as the U.S. dollar remains the world’s reserve currency, it may eventually become a problem.
- Equity Market Outlook: After two strong years of S&P 500 returns, we anticipate more moderate equity market performance in 2025, with expected returns aligned with historic norms. While we expect continued growth, we also foresee increased volatility and a potential shift in market leadership.
As we step into 2025, we’re excited about the year ahead and grateful for our partnership with you. We truly value the trust and collaboration we’ve built, and we’re looking forward to another great year together. We’ll continue keeping an eye on the developments that could shape the market and will keep you updated along the way. Here’s to a successful 2025 and the opportunities it brings.
Definitions
1. Mag – 7 are Alphabet (Google), Amazon, Apple, Meta Platforms, Microsoft, Nvidia, & Telsa
2. Core PCE Deflator is a measure of inflation that removes the impact of more volatile food and energy prices from the measure of price changes. PCE stands for Personal Consumption Expenditures and is included as a portion of the quarterly economic data provided by the US Bureau of Economic Analysis (BEA) in its quarterly GDP (Gross Domestic Product) estimates of domestic economic growth
