Most likely, 2025 will present its percentage of obstacles, although not necessarily the same as in 2024. What are the headaches to pay attention to? Can any of the effects of 2024 serve as a clue to long-term success?
The US economy showed its mettle in 2024, and the S index
Many investors have had a smart year despite so much adversity, demonstrating just how resilient markets can be and serving as a useful reminder that we need to be patient in difficult times. Time in the market is longer than time in the market. In other words, you can only reap the benefits of a resilient economy if you invest in it.
The US unemployment rate remained low at 4. 1%, with a record 160 million people employed. In addition, wages have kept pace with inflation, thus expanding the source of disposable income. With around seventy percent of the US economy driven by customer spending, it’s no surprise that high-level employment and a stable source of disposable income have kept the engine revving.
Americans appear to be saving about 2% less than they have over a 30-year average—4% rather than 6%. Whether or not that’s constructive behavior is up for discussion, but it does seem to reflect the notion that a gainfully employed public tends to spend. Few factors juice the economy more than a consumer with a job looking to purchase goods and services with their hard-earned wages. This trend has the potential to continue through 2025.
Productivity is another compelling catalyst for economic growth. Thanks to massive investments in artificial intelligence and the speed of innovative technology, U.S. productivity growth has surged, rising from a tick over 1% annually to more than 2% over the past two years.
This renewed momentum is reminiscent of the late 1990s when the internet revolutionized efficiency and output. With AI applications and automation enabling businesses to accomplish more with less, it appears the groundwork is being laid for another productivity-driven boom—an essential indicator of sustained economic vitality.
Politics doesn’t align with the fiscal ecosystem and vice versa, but history shows plenty of examples of really big market gains during the first 365 days of a new presidential term. In fact, the S
There’s already a buzz around two market-friendly themes in 2025—tax cuts and deregulation. Both have the potential to drive investor optimism. With the executive and legislative branches now controlled by the same party, the political landscape may provide less friction against the swift implementation of commerce-supportive, private-sector-focused policies, creating favorable conditions for market growth.
A customs duty is related to inflation because it serves as a tax or duty imposed by the government on imported or exported goods. If the value of an item increases 20% overnight, someone has to pay for it. Typically, the customer will have to pay the invoice, although in rare cases the company(ies) concerned may absorb the cost.
The markets will closely follow the pricing strategy of the new administration.
The markets will be very attentive to the express pricing strategy of the new administration. A more specific technique rather than a general, generalized buildup may simply galvanize very different reactions, retaliation, and countermeasures. For example, focusing on Chinese products to adorn national security and change chains of origin. to the United States may have a different effect than the price lists imposed on the European Union or Mexico. The effect of the former may be more violent than scathing, given that the United States has particularly reduced its dependence on Chinese imports over the past decade. The latter scenarios seem less likely, but they can simply be used as a bargaining chip to gain influence in industrial and immigration negotiations between allies.
The most widespread analyzes and assessments demonstrate continued strength and allow for optimism. However, it would perhaps be unwise to expect the high stability of the last two years to be commonplace. Historically, peak-to-trough declines are a feature of the annual life cycle. On average, the S&P 500 reports annual declines of more than 16%. For comparison, 2023 and 2024 saw maximum declines of only 10% and 8. 5%, respectively.
Market pullbacks or corrections aren’t cause for panic but are a reality.
Market crashes or corrections cause panic, but they are a reality. For more than 50 years, the S Index
At only twenty-six months old, the existing bull market is young by old standards. Over the 50-plus years, the duration of bull markets has ranged from two to 11 years, with an average duration of about five years. Just because the bull market has done well doesn’t mean it can’t continue to do so. In other words, market history suggests this bull still has some painting left to do before the end of the rodeo.
Market history suggests this bull has work to do before the end of the rodeo.
In the 2010s and so far in the 2020s, dividends accounted for only 17% and 12% of total returns. To simplify, in general regress = replacement value + dividends. Aside from the tech boom of the 1990s, this is the least significant era for dividends on record. In part, this dynamic has created a void favoring quality dividend-oriented stocks, which can now account for a larger percentage of overall returns.
Understanding the contribution to dividends provides valuable insights into long-term investing. A “mean reversion” can also lead to dividends supporting a major player in investment performance. As income-focused methods gain traction, dividends are likely to play a more vital role in shaping portfolios’ long-term returns.
Bonds are back in the game, providing a true source of income and diversification in today’s market. While the 10-year US Treasury yield is back above 4. 5%, rates are near levels not seen since the mid-2000s (almost 20 years ago). This move marks a notable recovery from the ultra-low interest rate environment of the last decade. Remember, with bonds, “yield is destiny” and returns in this diversity have traditionally provided a steady source of income for investors. with decent returns while balancing portfolio risk. For investors looking for income and stability, it is more important than ever to understand the historical context of these rates and how they can be compatible in a comprehensive investment strategy.
Few factors drive U.S. equity markets over time as consistently as earnings growth. Seen as the bedrock on which all market growth is built, the significance of earnings-to-market performance is hard to overestimate. The 2025 forecast looks robust. Some project S&P 500 earnings per share (EPS) to grow by 13%, and others anticipate profit margins to expand to a record 13.7%, signaling improved efficiency across sectors.
Few factors influence U. S. stock markets as consistently over time as earnings growth.
High-margin sectors like technology and communications may lead the charge, but what’s more pivotal is how overall market performance impacts earnings and, in turn, Americans’ 401(k)s.
Almost each and every variation of stock market strategies (price expansion, boost, or reversal) has produced inflation-outpacing effects over the years. Income derived from an investment can be added to this list, with the advantage of allowing investors to receive a payment for waiting for expansion. In addition, although growth is inconsistent over shorter periods, the source of income from stock dividends, bond interest, or real estate investments such as distributions (REITs) can provide a constant cushion in times of financial hardship. along the way. This cushion can be especially valuable for retirees looking for a reliable cash flow. In 2025, those sources of income streams may be key to helping investors weather volatility while also staying on track to achieve their monetary goals.
The lessons of 2024 and expectations for 2025 both point to a need for investors to practice continued patience despite stubborn inflation and fears of recession. When anxiety-inducing factors arise, such discipline can be a challenge. However, resisting the urge to panic led many investors to reap the benefits of a resilient U.S. market. Future projections suggest that deregulation, capital spending on innovative technology, and consumer strength and resilience could lead to further economic stamina and fortitude. However, the spoils of such a dynamic will only be available to those who participate.
Future projections recommend that deregulation, capital spending on cutting-edge technologies, and customer strength and resilience can lead to greater economic vigor and strength.
The market’s new highs of the past couple of years may lead some to fear market pullbacks or corrections, but there is some reason to believe that the strength of U.S. markets might be in its earlier rather than later stages. A young bull tends to keep bucking.
It’s never easy to watch market ups and downs. Incorporating income investing into the bigger plan can sometimes soften the blow and allow for a less painful version of the necessary waiting game as investors navigate the natural, cyclical market volatility. The Army of American Productivity isn’t perfect, but it is resilient and productive. History shows that those who stay the course and march along with it typically benefit more than those who don’t.
The Army of American Productivity isn’t perfect, but it is resilient and productive.
Capital Investment Advisors, LLC is an SEC Registered Investment Adviser. Registration does not imply a certain level of skill or training. This material is provided for educational purposes only and is not intended to be relied upon as a forecast, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Actual results could differ materially from the estimates and opinions provided here. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. “Peak-to-trough” refers to the measurement of the decline from the highest point (peak) of a market or asset price to its lowest point (trough) during a specific period. All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease or be totally eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Risks of the REITs are similar to those associated with direct ownership of real estate, such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and creditworthiness of the issuer. Diversification and asset allocation strategies do not ensure a profit and do not protect against losses in declining markets. Past performance does not guarantee future results.
Capital Investment Advisors, an Atlanta-based RIA with $5 Billion in assets under management (as of 12/31/23). Additionally, I am the host of the nationally-recognized podcast Retire Sooner and the longtime host of Money Matters, a weekly call-in financial show on 95.5 WSB — Atlanta’s News and Talk. I am the author of four books, including best-sellers You Can Retire Sooner Than You Think and What the Happiest Retirees Know. Barron’s has named me as one of America’s Top 1,200 Financial Advisors every year since 2014, and I’ve been on the Barron’s Top 100 Independent Advisors list yearly since 2016. My mission is to help people retire sooner and happier than they ever thought possible by offering objective, plain-speaking advice.
A community. Many voices. Create a free account to share your thoughts.
Our community is about connecting people through open and thoughtful conversations. We want our readers to share their views and exchange ideas and facts in a safe space.
To do so, please comply with the posting regulations in our site’s terms of use. We summarize some of those key regulations below. In short, civilians.
Your post will be rejected if we notice that it seems to contain:
User accounts will be locked if we become aware that users are engaging in:
So how can you be a user?
Thank you for reading our Community Guidelines. Read the full list of publishing regulations discovered in our site’s terms of use.