While the markets seemed to crawl to the finish line in 2024, we still ended the year with strong growth for the second year in a row. I recall writing last year that it was entirely possible for markets to have another strong year, despite the negative headlines. Historically, good years tend to cluster together, and resilience is a hallmark of the market. When we think back to how tough 2022 was for both stocks and bonds, it almost feels like a distant memory given the strong performance we’ve seen over the past two years.
As we turn the page to 2025 (that feels weird to type, 2025), it’s natural to reflect on the shifts and challenges the market and economy have navigated. As always, the year brought plenty of surprises, presenting investors with both risks and opportunities. What this past year reinforced, more than anything, is the value of sticking to a disciplined, long-term investment strategy. Looking back at the reputable market analysts and economic forecasters, most “experts” got more wrong than they got right. I might add that this is par for the course.
The Case for Staying Disciplined
Those who have stayed the course with a disciplined investment approach have been handsomely rewarded. Of course, just because markets have been on an upward trend doesn’t mean they will continue to rise indefinitely. Historically, euphoria can signal an upcoming market correction, but I don’t sense that kind of exuberant frenzy right now. Instead, the mood is one of cautious optimism among economic and market analysts.
While attempting to time the market is futile, we do expect some significant changes in 2025 that are worth mentioning:
- Tax Law Changes
2025 will see potential changes to tax laws, particularly related to the Tax Cuts and Jobs Act (TCJA), which was enacted in 2017. Many of the provisions, such as lower individual income tax rates and increased gift and estate tax exemptions, are set to "sunset" at the end of 2025 unless Congress acts. President Trump, newly elected, has campaigned on extending or altering many of these provisions, which could significantly impact your financial planning. - Inflation and Interest Rates
Inflation remains a key issue for 2025, despite easing somewhat in recent months. This is especially relevant for retirees relying on fixed incomes. We’re unlikely to see prices return to pre-COVID levels, and most goods, services, and real estate are expected to remain more expensive. This makes it essential to build an investment portfolio that outpaces inflation while still achieving your long-term financial goals. - Political Uncertainty
Even with a Republican Congress and President (both somewhat surprising developments), expect a year of intense debate and uncertainty regarding policy and its potential impact on your investments. President-elect Trump’s platform of lower taxes and deregulation could fuel economic growth, but his stance on tariffs and immigration might contribute to a more stagnant economic environment.
Looking Ahead: What to Expect
As for market performance, the positive momentum we saw in 2024, with a growing percentage of companies contributing to stock index gains, points to continued growth. Historical data shows that when the trailing one-year return for the S&P 500 exceeds 30%, as it does now, it’s rare for markets to “peak”. Schwab Investment Research notes that only two bull market peaks in the last 70 years occurred in this situation, so we remain cautious but optimistic. However, discipline is warranted as there’s a heightened risk of volatility and periodic drawdowns if we are in the late stages of a strong bull run. With a new congress and administration we will start to get more clarity around what legislation and law could have an impact on your financial plan.
At BCS Wealth Management, our focus remains on maintaining a disciplined, long-term approach to financial planning. Staying informed about the latest market predictions and legislative changes is important, but even more so is sticking to a plan rooted in timeless financial principles that offer the greatest chance for investment success.
We don’t claim to be stock pickers or market timers. The odds of consistently outperforming a stock index are incredibly low. But there are proven strategies to help investors “outperform” over time, and they don’t involve buying and selling at the "perfect" moment. Some of these strategies include:
- Diversified and suitable asset allocation
- Cost-effective investment implementation
- Disciplined rebalancing in line with your financial plan and risk tolerance
- Behavioral finance coaching and awareness
- Asset location and tax efficiency
- A sound withdrawal strategy
A Look Ahead to 2025
As we step into 2025, I encourage you to take some time to review your financial, estate, and tax planning—no matter your age or stage in life. We’re here to help with any questions you may have and to ensure your plan is aligned with your long-term goals.
Our team is excited for the future and our continued partnership with our clients and colleagues. We continue to invest in the business and success of our clients via technology, strategic partnerships, staffing, and later this year… new office space. You can follow along and stay up to date by subscribing to our blog (on our new website!) and podcast, as well as following the firm on Facebook, LinkedIn and Instagram.
Wishing you a prosperous and fulfilling New Year!