The Experts Don’t Know Anything

So, here we are, January of 2025 and we’re starting to hear from all the pundits about what 2025 is going to look like. Before we dive into what the experts are saying, let’s take a look at what the experts said about 2023 and 2024, and see if they were right.

What was the overwhelming Stock Market and Economic news as we moved from 2022 into 2023? 

If you recall 2022 was a punishing year stocks and bonds due to rapid rising interest rates.  Stocks pulled back roughly 20% and bonds fell approximately 14%.  2022 was a “no where to run, no where to hide” scenario. 

As we moved from 2022 into 2023, here’s what the experts had to say about expectations for 2023:

Stock Market Forecast:

• Volatility expected
• Continued market turbulence due to rising interest rates, inflation and corporate earnings pressure
• Rebound potential was Mild. A modest recovery was predicted
• Recommendations were to consider overweighting defensive sectors for investing such as healthcare, utilities and consumer staples.
• Growth and Tech stocks were likely to struggle

Economy Forecast:

• Recession probability was 35% and widely anticipated
• Inflation was expected to cool
• Labor market was expected to remain resilient
• More interest rate hikes
• Housing market slow down

Other concerns:

• Geopolitical concerns: Russia/Ukraine and US/China tensions
• Expected corporate earnings decline with higher costs and slowing demand

What actually happened in 2023?

• Stock Market had a significant rally: 26% return, led by tech and growth stocks
  • Healthcare: 0.3%Utilities: -10.4%Consumer Staples: -2.3%
  • Technology: 56%
• The Economy didn’t face a recession with GDP growth exceeding expectations
  • Inflation declined and fell closer to the Fed’s target
  • Unemployment remained near historic lows
  • The Fed increased interest rates above 5% and maintained those levels longer than anticipated
  • Housing prices remained elevated mostly due to limited inventory.
• Geopolitically, the Russia/Ukraine war continued as did US/China tensions but had limited market impact
  • Corporate earnings surprised to the upside even with added costs companies maintained margins.

As we moved from 2023 into 2024, here’s what the experts had to say about expectations for 2024:

Stock Market Forecast:

• Moderate growth expected – 8-10%
• Recommendations were to consider overweighting technology due to artificial intelligence and cloud computing

Economy Forecast:

• Mild Recession concerns
• Inflation Moderation
• Labor market stability
• Interest rate cuts

Other concerns:

• Geopolitical concerns continued
• Continued pressure on corporate earnings especially after a positive 2023

What actually happened in 2024?

Stock Market rally continued with a 25% return

• Healthcare: 1.1%
• Utilities: 20.1% (rebounding from a terrible 2023)
• Consumer Staples: 12.2% (also rebounding from 2023)
• Technology: 37.6% (continuing widespread growth in the category)

The Economy showed further resilience achieving steady growth throughout the year.

• Inflation declined neared the Fed’s target of 2%
• Unemployment continued to remain low
• The Fed cut interest rates three times (50 basis points, 25 bps and 25 bps) for a total of 100 basis points or 1.00% reducing the target range to 4.25%-4.50%

Other concerns:

• Geopolitically, tensions persisted however, the tension once again had little impact on the US economy
• Robust corporate earnings surpassed expectations with many companies reporting strong profits.

So, as we move into 2025 what are the experts saying and what should we consider as we start to make decisions for our own financial situations? Before I break down what the experts are saying, let me share a very recent story with you.  A client asked, should I buy this home? There were several moving pieces to consider as with any major financial decision. However, after eliminating as many what if’s as possible and reducing the decision to the constants that we know, the decision became quite clear.  The purchase was a want not a need and involved a level of risk.  What was the biggest risk in this scenario? Job stability. 

Why do I share this?  In many financial decisions we can look at all the factors in the world. We always want to do our best to account for the unaccounted for, but we also need to ensure we’re looking at the things that matter most.  Having your proverbial ducks in a row for a catastrophic circumstance (death, disability, wills, trusts etc) is a necessity. Then as we move beyond that, look at the goal. From there it becomes easier to decipher what you can and can’t control. Then decide on the level of risk you are willing to accept. Typically, our appetite for risk is higher when we’re younger because we have more time to “make it up” or survive if something goes wrong.  As we get older, some view risk through a different lens.  What I will tell you is that each person is different.  Ultimately, you’ll know the outcome of your decision as time passes. 

What is the outlook for 2025?

Stock Market Forecast:

• The projection of growth continues with many experts predicting between a 7-14% return.
• We could see volatility depending upon the implementation of tariffs with the new administration

Economy Forecast:

• Keep your eye on potential tax reforms and how they may impact you. It is likely there will be a fair amount of activity in that realm.  If you’re not paying attention, you could miss opportunities to use the tax code to your advantage
• Be aware that if there are not tax reforms there are substantial tax strategies that may need to be acted upon before the end of 2025 due to the sunset of existing tax provisions
• Interest rates are likely to remain close to where they are for the time being
• For business owners, it would be a great time to start to look at succession strategies if you are even considering exiting your business in the next 10 years given current laws

Other concerns:

• Geopolitical tensions remain, however, there is optimism that tensions may be tempered with the new administration
• Impact of the new administration on Trade with other countries and the impact on prices domestically
• United States citizens are carrying more debt than ever. If this trend doesn’t begin to reverse it will likely impact the economy at some point.

I hope this information provides you with perspective as we move into a new year.  The most important thing you can do is create clear objectives for 2025 while knowing that things change.  Be prepared to make adjustments as needed.  Be prepared to stay on track with your goals even if the world changes around you.  There are always opportunities and challenges that present themselves, the question is whether you will be prepared in advance or if you will have to respond in the face of adversity?

Plan with Confidence.