2025 Market & Economic Outlook: Maintaining Strategic Focus in a Shifting Landscape

Of course, there are always things to worry about and this year at WHZ Strategic Wealth Advisors, we’d put high stock market valuations, large US deficits, and wars around the world on our list. But those concerns are overshadowed by the solid US government, growing economy, and technological innovation that continues to make the US the best place in the world to invest.

Peering Into 2025 With Trump Back at the Helm   

2024 turned out far better than the naysayers feared when the year began. The highly anticipated recession never arrived and the economy grew by roughly 2.6% year-over-year. The presidential election came and went without any rioting or disruption. And equity investors had reason to be jolly after the S&P 500 rose more than 20% in 2024, bringing its two-year gain to roughly 50%. 

Investors begin 2025 more bullish about the markets than they were a year ago and for good reason. Over the next 12 months the stock market should be supported by a Federal Reserve that’s expected to continue cutting interest rates. Corporate earnings should benefit from the new Trump administration, which is expected to cut taxes and regulation. Companies should also profit from the surge in demand for artificial intelligence products or because they’re using artificial intelligence to enhance productivity. It’s a backdrop that makes Corporate America the envy of the world.     

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Market momentum could certainly take a breather at some point given the S&P 500’s forward P/E is north of 22. But there are so many positive winds propelling the US markets forward that we’d expect any pullback would be short lived. Here’s a look at the important market drivers of 2025: 

Fed’s Still Cutting. One of the biggest changes in 2024 was the Federal Reserve’s shift from a rate tightening cycle to a rate cutting cycle. Inflation decelerated during the course of the year, allowing the Fed to cut rates by half a percentage point in September and a quarter of a percentage point in each October and December.  

In 2025, the Federal Reserve had indicated it will slowing its rate-cutting pace because the economy has been stronger than expected and inflation readings have been a touch higher than expected. Federal Reserve officials have signaled their intention to cut rates two more times over the course of the next 12 months. Doing so should help the economy continue to grow moderately.  

Trump Returns. President-elect Donald Trump returns to the Oval Office with a strong mandate to lead from voters and the latitude to get legislation passed in a Republican-controlled Congress. Trump’s campaign promises included cutting corporate taxes for companies producing goods in the US to 15%, which should help those companies’ margins and earnings improve.  

Candidate Trump also promised to extend the tax breaks in the 2017 Tax Cuts and Jobs Act and to slash taxes on Social Security and tips. Homeowners in our area stand to benefit if Trump follows through on his promise to lift the $10,000 cap on state and local property tax deductions. These tax breaks should boost consumers’ confidence and fatten their wallets, allowing them to continue shopping even after the holidays come to a close.     

Though not officially in office, Trump has already announced the Department of Government Efficiency, to be headed by Elon Musk and Vivek Ramaswamy, who have a mandate to dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures and restructure federal agencies. The duo has already floated the idea of combining a number of financial regulators under one roof, a move that would certainly be cheered by bankers. Any savings could help pay for Trump’s proposed tax cuts.  

As 2025 progresses, we’ll certainly be keeping an eye on US debt levels and bond investors’ willingness to fund deficits. Even though the Federal Reserve has been cutting short-term interest rates, longer-term interest rates have remained elevated, potentially reflecting bond investors’ nervousness over the deficit.   

Continued US Outperformance. We continue to expect US markets to outperform the markets of other nations. In addition to a strong economy, the US boasts companies that are in the midst of a technological renaissance. Nvidia built the computer chip that’s powering the calculations behind artificial intelligence. OpenAI, Meta Platforms and others have developed AI software that helps people work more efficiently. And companies that embrace these new AI tools have the potential to improve their margins and earnings  

These companies also benefit from being headquartered in a country with a stable government. The US isn’t facing early elections like France or Germany. It’s not fighting deflation like China, nor is it in the middle of a three-year war like Russia. For this and so much more we are thankful as another year begins.  

All of us at WHZ Strategic Wealth Advisors wish you a healthy and happy 2025. If you’d like to create a financial strategy aligned with your specific goals using our Plan Well, Invest Well, Live Well™ process, contact us for a  complimentary consultation on our website at whzwealth.com, or give us a call at (860) 928-2341. We work to provide all of our clients with “Absolute Confidence. Unwavering Partnership. For Life.”       

Authored by Principal/Managing Partner Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.