Key Takeaways
- A soft landing should ensure the expansion enters a fifth year
- Despite slower job growth, the unemployment rate should stay low
- Solid earnings growth and a resilient economy should support U.S. equities
Happy Holidays! As the page for the new calendar year will soon turn, three cheers for a happy, healthy, and prosperous new year! With 2024 rapidly drawing to a close, we reflect on the year and all that’s transpired—our readers are wonderful, the economy remains in good shape, and market returns have been stellar for those who participate. However, the Fed’s final meeting of the year threw the markets a twist—with equity volatility spiking, U.S. equities struggling and yields heading higher as inflation uncertainty lurks. But with inflation expectations still anchored and S&P 500 earnings expected to move higher, any near-term setbacks in the financial markets should remain just a blip. The release of our Ten Themes for 2025 (i.e., specific asset class views with actionable investment ideas) is just a few weeks away, but we want to share our 12 aspirational wishes (i.e., high-level macro events) that, if they come true, should help the economy and markets prosper in 2025. They include:
One Year Of World Peace | While tensions remain elevated across the globe—with ongoing wars in Europe and the Middle East and an upheaval in politics following the Global Election super-cycle in 2024—we are hopeful that 2025 will bring more stability and world peace. Our wish for a ceasefire to the conflicts that exist and less political discourse in the new year would surely be a wonderful gift.
Inflation Moves Back To Two Percent | The Fed’s preferred measure of inflation (core PCE) has nearly halved (2.8%) from its peak, but progress has recently stalled above the Fed’s 2.0% target level. While inflation worries have intensified as growth remains resilient and tariff uncertainty is top of mind, here’s hoping the disinflationary trend resumes and progress toward 2.0% will not be doomed.
Gas Under $3.00 A Gallon | With gas prices falling steadily since the mid-point of this year, consumers have had plenty of reason to cheer. With budgets still strained and consumers more discerning, gas below $3.00/gallon would bring some additional relief to their burden.
Four Percent Unemployment Rate | The labor market has rebalanced from its post-pandemic strength, but despite a slowdown in hiring, layoffs remain reassuringly low. While the unemployment rate (4.2%) has ticked up from its historic low (3.5%)—a soft landing and Fed rate cuts should ensure the economy remains at full employment. A 4.0% unemployment rate would be something to celebrate.
GDP Growth For Five Years In A Row | While the Fed’s aggressive tightening could have derailed growth in 2024, the economy proved more resilient than expected by policymakers and others. With a few timely rate cuts by the Fed and a surge in confidence following the election, the economy remains poised to continue its expansion. As we enter the new year, five years of GDP growth is likely to appear.
Biggest Six Mega-Cap Tech (MAGMAN) Soar To New Heights | AI enthusiasm has been a big theme, driving equity prices to levels rarely seen! While valuations are lofty, earnings momentum and high margins are driving gains, our wish in 2025 is more of the same. Another year of mega-cap tech thriving would make 2025 a prosperous year for all.
