In the Short-Run, the Market Is a Voting Machine, But in the Long-Run, the Market Is a Weighing Machine” – Warren Buffett
Welcome to 2025!
This holiday season brought moments of joy and reflection, including reconnecting with cherished family traditions—like finding that tattered old hand written recipe and cooking the family favorites together. Reflecting on this, the economy feels much like that old, tattered recipe card—steady and resilient, but with potential challenges ahead.
As we embark on a new year, let's focus on understanding the current economic landscape, the risks that could emerge, and how to maintain balance in our portfolios during uncertainty.
In This Month’s Edition
Economic Outlook: Steady Progress with Challenges Ahead
What to Watch: Risks and Challenges Ahead
Simplifying Market and Portfolio Dynamics
What This Means for You
The Finish
Economic Outlook: Steady Progress with Challenges Ahead
The American economy enters 2025 with strong momentum:
GDP Growth: Real GDP grew by 2.4% in 2024 and is projected to maintain this pace in 2025, driven by strong consumer spending and business investment.
Labor Market Strength: December's jobs report should show 150,000–200,000 new payroll jobs, continuing a healthy trend. Unemployment is expected to remain near 4% despite growing labor supply.
Inflation Progress: Inflation is trending down, with expectations to fall toward the Federal Reserve's 2% target in the coming months. Moderate wage growth and global economic conditions support this trajectory.
Corporate Profits: S&P 500 earnings are projected to rise 14.8% in 2025, with all sectors contributing positively—a strong signal of corporate health.
What to Watch: Risks and Challenges Ahead
While the economy looks strong, there are some risks to keep in mind:
Policy Changes Could Cause Ripples: Big changes in government policies—like new taxes, trade rules, or changes to immigration—might lead to higher costs for businesses or consumers. For example, higher tariffs (taxes on imported goods) could make everyday items more expensive. But experts think these changes are unlikely to be extreme, as they could hurt economic growth.
High Debt Levels: The U.S. government is spending much more than it earns, leading to a large deficit. This can eventually lead to higher interest rates, which makes borrowing money more expensive—for both the government and individuals.
Wealth Inequality: A lot of the economic gains in recent years have gone to the wealthiest households. This could lead to social or political challenges that impact the overall economy.
Making Sense of Markets and Portfolios
The stock market might feel like a roller coaster, but understanding its current trends can help you make better decisions.
Why Are Stocks Expensive? The S&P 500 (an index of large U.S. companies) is currently valued higher than usual, meaning people are paying more for each dollar of company profits. This happens when investors are optimistic, but it can also mean higher risks if things don’t go as planned.
What this means for you: Expensive stocks might not grow as much in the future, so having a diverse mix of investments is even more important.
What Is Rebalancing, and Why Does It Matter? Over time, your investments can get out of balance as some grow faster than others. For example, if stocks do really well, you might end up with more money in stocks than you originally planned. Rebalancing means adjusting your portfolio back to your original plan, even if it feels like you're selling "winners."
Why it’s important: Rebalancing seeking to reduce risk by making sure you’re not too dependent on any one type of investment.
Why Consider International Investments? Right now, U.S. stocks make up about 67% of global markets, but stocks in other countries are often cheaper and offer different opportunities for growth.
For you: Adding international stocks to your portfolio could provide better long-term growth and reduce risks tied to the U.S. economy.
What This Means for You
Navigating an environment marked by stability and potential challenges requires thoughtful planning:
Stay Balanced: Keep your investments diversified across different types of assets, like stocks and bonds, to help reduce risk.
Think Long Term: It’s easy to get caught up in day-to-day market changes, but staying focused on your goals is the key to success.
Ask Questions: If you’re unsure about how these trends affect your personal finances, reach out—we’re here to help!
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Sounding Board Consultation
As a service to our clients, we offer your friends and family a no-obligation Sounding Board Consultation. This 30-minute session allows them to ask questions and receive feedback about their current financial plan or any other financial topics they're concerned about.
-Lamont Brown, CFP®
The Finish
Over the holidays, I pulled out an old, tattered recipe card that’s been in our family for years. Its edges are frayed, and the writing has faded, but it’s still the foundation of some of our most cherished traditions. It’s a reminder that sticking to what works—while adapting as needed—can create something lasting and meaningful.
In the same way, a thoughtful financial plan helps us navigate the twists and turns of life, staying steady even when things feel uncertain. As we look to the year ahead, let’s focus on the fundamentals and keep moving forward.
Here’s to a balanced and fulfilling 2025!
Warm regards, Lamont Brown, CFP®, AIF®, MBA Owner/Wealth Manager
This newsletter is provided for informational and educational purposes only. As such, the information contained herein is not intended and should not be construed as individualized advice or recommendation of any kind.
The opinions, forecasts, and other forward-looking statements expressed herein are not guarantees of any future performance and actual results or developments may differ materially from those projected. The information provided herein is believed to be reliable, but we do not guarantee accuracy, timeliness, or completeness. It is provided “as is” without any express or implied warranties.
The S&P 500 is a capitalization-weighted index designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index is unmanaged and cannot be directly invested in.
Equity securities are subject to price fluctuation and investments made in small and mid-cap companies generally involve a higher degree of risk and volatility than investments in large-cap companies. International securities are generally subject to increased risks, including currency fluctuations and social, economic, and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
There is no assurance that any investment, plan, or strategy will be successful. Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results, and nothing herein should be interpreted as an indication of future performance. Please consult your financial professional before making any investment or financial decisions.
Investment advice offered through Mariner Independent Advisor Network, LLC, a registered investment adviser. ALNA Financial Group, LLC and Mariner Independent Advisor Network, LLC are separate entities.
