As we enter 2025, and a new presidential administration, there are many changes afoot and it is a good time to reflect and look ahead to the future to make positive steps towards financial happiness. In terms of the financial markets, they are in an intriguing position. After two years of growth, particularly in the U.S. stock market, there are both opportunities and challenges ahead. Here’s a breakdown of where we’ve been, what’s happening now, and what we think you as investors should keep in mind to make the most of the coming year.
Looking Back at 2024
2024 was a strong year for equities, with the S&P 500 delivering an impressive 23% gain. this was a surprise, because at the start of the year, many economists had assumed that the U.S. economy would go into a recession due to higher interest rates. 2024 marked the second consecutive year of 20%-plus returns for the index. However, December saw a slight pullback as investors took profits and rebalanced their portfolios, particularly among mega-cap growth stocks that had driven much of the year’s performance.
Globally, the U.S. was a standout performer. The MSCI All-Country World Index rose nearly 16%, with strong contributions from U.S. sectors like Communication Services (+39%), Technology (+36%), Consumer Discretionary (+29%), and Financials (+28%). In contrast, Europe struggled, with the Euro Stoxx 600 posting a small decline. In China, the economy is having trouble pulling out of the deep troubles caused by the overbuilt property market.
What to Expect in 2025
After such growth, we are seeing some cooling off in the market’s momentum. This is natural and not necessarily a cause for concern. Early 2025 could see slower gains as investors navigate factors like premium valuations, relatively high bond yields, concerns over debt, Federal Reserve policies and the impact of proposed tariffs. The slowing momentum in stock prices should not overshadow the potential for a strong economic growth. There are several reasons why:
Corporate Fundamentals: We anticipate Q4 corporate profits to exceed expectations, driven by productivity improvements, and a stable job market.
Inflation Relief: Believe it or not, inflationary pressures could ease, creating a more favorable environment for both businesses and consumers.
Cash on the Sidelines: There’s a surplus of cash waiting to be reinvested, which could fuel market growth by mid-Q1.
Recommended Investment Strategies for 2025
Diversify in Equities: While big-name growth stocks have dominated in recent years, 2025 could see other areas of the market gaining traction. A diversified portfolio can help you capture opportunities across sectors and regions.
Reassess Fixed Income: With cash yields likely to decline, consider moving funds from cash into bonds with longer durations. The normalization of the yield curve could present attractive entry points for investors.
Leverage Volatility: Market ups and downs are inevitable. Use these moments of volatility to adjust your portfolio strategically, staying fully invested for the long term.
Overall Takeaways
Despite potential headwinds, the broader economic environment remains supportive. Earnings growth, solid economic fundamentals, and a more accommodative monetary policy all point to a resilient market. The bull market, which many believe is in its mid-cycle stage, could have years of growth ahead.
As we enter 2025, we recommend balancing optimism and vigilance. Keep an eye on geopolitical risks and longer-term bond yields, but don’t let short-term noise derail your long-term strategy. By staying diversified, patient, and focused on the fundamentals, investors can position themselves for success in the year ahead.
If you are new to investing, now is a good time to get started with creating and growing a portfolio. Let’s make 2025 your year!

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