Market Data

With November’s presidential election in the rearview, associated economic uncertainty and market volatility have eased mildly, and investor optimism has increased to some degree. Inflation inched up in December, due mainly to energy and food price increases, but is expected to trend back downward in 2025. Forecasters broadly expect 2025 to be a transition year with a slowly growing economy, but much hinges on the policies of the new Trump administration. Agendas focused on deregulation and tax cuts, for example, have the potential to encourage growth, while changes to tariffs and immigration could cause higher inflation. As policies take time to implement, any associated impact is likely delayed until the second half of the year.

Amidst easing inflationary pressures, a softening job market, and increasing unemployment, the U.S. economy cooled during the third quarter. The upcoming presidential election, coupled with on-going wars overseas, generates uncertainty and market volatility.

In a nation founded on the principles of democracy and discourse, it is disheartening to witness the abhorrent political violence of the past weekend, which underscores the polarization and divisiveness of our nation’s current political landscape. Following a highly contentious primary season, pressures may escalate further in the months ahead, prompting added uncertainty and market volatility, though historically speaking, elections rarely drive market outcomes over the longer term.

The first quarter ushered in a run of healthy growth for the U.S. economy, somewhat unexpected given wide-spread concerns that it could weaken. Job creation and labor force participation are exceeding expectations, wages continue to rise, and consumer sentiment has reached new highs, all boosting the supply-side of the economy. As noted recently by JP Morgan, “So far in 2024, there are signs that U.S. growth is still strong, and that growth in the rest of the world may start to accelerate.” While economists on the whole agree the inflation-surge has passed, opinions are mixed on the extent to which – if at all – rates will be cut this year. Down considerably from its peak, inflation still remains above the Fed’s 2% target, yet a healthy economy likely reduces any sense of urgency to cut rates further. While geopolitical tensions and the upcoming election are likely to cause intermittent volatility, recession risks are relatively low, and an overall positive performance can be expected in the near term.