As we step into 2025, we know a new year has the potential to bring us opportunities and uncertainties. As your financial partner, we are committed to guiding you through evolving economic trends, global shifts and market fluctuations. The five key areas we are paying attention to in 2025 are:
- Interest Rates: The Federal Reserve rate decisions are still a wild card, and they will continue to have significant impact on market sentiment (how investors feel about the market). This is important because the Fed’s actions on interest rate can have a great impact on housing, business investments and broader economic growth. We will have a sharp focus on what the Fed is doing and how the market responds to their rate decisions.
- Inflation Trends: The good news is that inflation has shown signs of moderation, however, there is still ongoing inflationary pressure, particularly in wages, energy, and commodities. Inflation could continue to impact both corporate profits and consumer spending. There has been a lot of talk about tariffs with our new administration, which could easily lead to an increase in prices for foreign goods and potentially more inflation. New policy decisions can be a big factor, and this is something we will continue to monitor.
- Corporate Earnings and Profitability: This is the area that we pay the most attention to every year, because company earnings drive investment performance in the long run. At the end of the day, remember the stock market is made up of companies, and even though there are many short-term market fluctuations, ultimately, we are hoping for long-term profitability from the companies we invest in.
- Technological Innovation and Market Disruption: Our world has changed immensely in the last few years with the adaption of artificial intelligence. AI has already provided support for productivity and efficiency, and it will be interesting to see how AI shapes our future. We anticipate that companies that invest successfully in AI and technology to improve productivity will likely beat out the companies that lag behind. However, we also think that growth in these companies could slow with further competition. It will be important for us to watch companies that focus on technological innovation and how they may disrupt the markets for the long-term.
- Stock Valuations: We will be keeping an eye on stock valuations this year as U.S. markets continue to trade at higher valuations, meaning they are more expensive. When the U.S. markets trade at high valuations it can raise questions about sustainability and investor sentiment. In our view though, moderating inflation, stable interest rates, and potential double-digit earnings growth in 2025 support above-average valuations.
These are the key things we are watching, as well as so much more. We hope that understanding these trends will help you stay grounded as a long-term investor. Remember, market volatility is completely normal, and we are constantly watching the changing landscape of our markets. There is a lot of uncertainty going into this year, like every year, and we will continue to keep you informed on what you need to know. From our entire team, we hope that 2025 is a great year for you and your families. If you need more guidance, clarification or support, we are here for you at Bloom Wealth Advisors.
Sincerely,
Amy Noel, CFP®, MBA
Founder, Wealth Advisor
