Equities
In 2024, equity markets saw impressive gains, with the S&P 500 (IVV ETF) up 24.93%, the Dow Jones Industrial Average (DIA ETF) rising 14.82%, and the Nasdaq 100 (QQQM ETF) surging 25.68%. This growth was driven by solid economic expansion, falling inflation, Federal Reserve interest-rate cuts, strong corporate earnings, and significant tech gains fueled by AI advancements.
Looking ahead to 2025, analysts expect these positive trends to persist. The market is anticipated to broaden, with a rotation into sectors beyond technology, creating a more diverse investment landscape. Additionally, a favorable environment for mergers and acquisitions and increased clarity on Federal Reserve policy are expected to sustain market momentum into the new year.
Fixed Income
In 2024, bond investors experienced modest gains, with Aggregate Bonds (AGG ETF) increasing by 1.3%, Treasury Bonds (GOVT ETF) rising by 2.95%, and Municipal Bonds (MUB ETF) up by 1.26%. These small gains were primarily influenced by changes in Federal Reserve policy, which contributed to a volatile year for fixed-income markets.
Looking ahead to 2025, analysts anticipate a more favorable environment for bond investors. A combination of relatively high current yields and the prospect of lower interest rates is expected to offer more attractive total returns for bonds in the coming year.
2025 Risks
Inflation reacceleration is a concern, as historically, inflationary cycles often have multiple peaks with long lags between them. This pattern could lead to a premature end to the Federal Reserve’s interest-rate cuts or even prompt rate hikes, a shift that might unsettle investors.
Geopolitical factors also pose risks, potentially disrupting the supply of goods and labor. Events such as new tariffs or conflicts overseas, particularly in regions like the Middle East or Ukraine, could have significant economic impacts.
In addition, Washington policy uncertainty is a major question mark for markets and the economy in 2025. President-elect Trump has campaigned on sweeping changes, including new tariffs, tax cuts, and deregulation. However, it remains unclear how these promises will translate into action, adding another layer of uncertainty for investors and the economy.