Increasingly Optimistic
Economic Growth

The pace of economic growth may slow in 2025, potentially setting the stage for the next wave of secular growth. Such a headline goes against conventional wisdom on why it deserves our top optimistic spot, but the reality of a soft(er) economic landing is not out of the question. The current business cycle is stretched by historical standards, and a reset could bode well for future economic growth potential.
Oil Prices

Oil prices are likely to remain subdued in 2025, influenced by policies from the incoming administration as well as a desire to pursue domestic energy independence. This could positively impact the 2025 inflationary landscape as it relates to energy’s attribution to the Consumer Price Index.
Housing

The path of lower (or neutral) interest rates in 2025 may create the most favorable environment for home buyers since 2021. Sentiment data tied to new buyers indicated extreme bearishness in 2024, which we believe could result in a wave of optimism from the lagged effect of interest rate cuts. Existing home sales last year dropped to levels comparable to the Great Financial Crisis, which is a level we believe to be too pessimistic for the current economic environment.
Neutral
Equity Market Participation

Equity market participation in 2025 is likely to yield a lower return profile relative to the robust gains of 2024. While valuations appear high from an equity index standpoint (such as the S&P 500), there is tangible value in the non-market capitalization stock selection process. We believe by focusing on these opportunities, as well as domestic companies that derive most of their revenue from U.S. sources, investors may achieve a return profile that will satisfy their expected long-term returns.
Geopolitics

In the absence of newfound geopolitical developments, the likelihood of sustained tensions in Ukraine and the Middle East remains embedded. Yet, most of the economic impact from such tensions was digested in 2024, reducing the likelihood of material surprises in the ongoing news cycle.
Inflation

The disinflation observed in 2024 may not appear as robust in 2025 as the momentum begins to appropriately dissipate. Marginal risk remains intact for an increase in inflation due to tariffs from fiscal policy, yet it may be subdued by the Fed’s pledge to lower interest rates. We anticipate Treasury yields will remain range-bound in 2025 and may influence sentiment on inflation if expected interest rate cuts do not materialize.
Risk & Uncertainty
Consumer Spending

Moderating consumer spending may become a focal point in 2025, which we believe to be a normal shift. The post-COVID consumption push has not ceased, and we recognize that a reset is appropriate. The pace of such a reset, however, is likely to govern discussions in the media cycle. We also foresee a normal shift to a higher unemployment rate because of the intact disinflationary trend. This may generate short-term jitters.
Trade Policy

Tariffs have returned to the forefront in 2025, as the incoming administration’s policies are likely to generate short-term uncertainty. We believe such actions may (eventually) provide a value-add to domestic economic growth, yet it may come at the expense of short-term capital markets volatility. Risks may transpire in either an inflationary bout (i.e., minimal interest rate cuts) or in uncertainty around earnings (i.e., stocks may price lower for future earnings). The possibility remains that both outcomes occur (or neither). As such, we are implementing risk management guidelines in our strategies that aim to mitigate risk while preserving the ability to participate in the event a bull market ensues. Presidential cycle seasonality supports greater risk management in year one.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. International investing involves special risks, such as currency fluctuation and political instability, and may not be suitable for all investors. These risks are often heightened for investments in emerging markets. Investment advice offered through CX Institutional, a registered investment advisor.