Market Commentary

January 9, 2025

Improved sector earnings growth and pro-growth policies should broaden stock market gains in 2025.  As for the economy, our base estimate for U.S. GDP growth has increased in recent months, as has the range of possible outcomes.  While we expect President Trump’s policies will not be nearly as harsh as his campaign rhetoric, there will be a tug-of-war between rival agendas (deregulation/tax cuts vs. tariffs/immigration).  The U.S. economic and financial market setting also differs tremendously from when he first took office in 2017.  The economy has limited slack, federal debt has swelled, corporate profits are at all-time highs, the stock market is more richly valued, and GOP majorities in Congress are far thinner.

After two years of exceptional stock market returns, investors should temper their expectations for 2025, as elevated valuations may limit return potential.  With that said, stocks remain well-supported by healthy GDP growth, moderating inflation, and monetary loosening.  The Trump administration’s past success in reducing tax and regulatory burdens also provides potential upside (there are also risks to consider).  Importantly, higher expected volatility will likely present compelling opportunities for stock pickers, especially since the market has not had a “typical” correction in over two years.

For our latest full Global Investment Outlook & Strategy Update, download the .pdf document.