When I hear that we are now in the year 2025, my mind has visions of The Jetsons, like flying cars and robotic maids. Alas, the flying cars are still in the prototype phase and I’m pretty sure a Roomba can’t dust the top shelf. However, as we look at how quickly some technologies are moving, for example, Artificial Intelligence (AI), there can be little doubt that changes are on their way and quickly.

The financial world is chock full of visions of our new year. The short version is that things look pretty good, but there are some concerns—a viewpoint that could also be written about almost any other year, if I’m being honest. Let’s start with some of the good news and then move on to the concerns.

After two excellent years for the stock markets in the United States, we are looking for another strong year in 2025. Although, it appears it may not be quite as good as the last two. Trends such as AI and increasing domestic manufacturing are expected to continue. Additionally, a more “business-friendly” administration will likely act as an additional tailwind. We also expect to see a stock market that is broader than just a few popular names.

The international stock markets have seen some growth, but not as much as the U.S. stock markets, and that growth was muted further due to the strong U.S. dollar. While we still view international markets as an important part of portfolios, it has been a bit of struggle lately. We’ve had to become more selective in our exposures, in some case by keying in on certain countries.

Interest rates will continue to be a focus, as will inflation. While inflation moderated of the last 24 months, we have seen some signs of a slight increase lately. Whether we see a significant amount of inflation may depend on some of the ideas floating around our nation’s capital. If we do see an increase in inflation, we will likely see the Federal Reserve change from easing interest rates to tightening them.  Increasing interest rates are typically a negative for bonds, although the higher income may partially offset some of that.

Commodities in 2025 look mixed. Like stocks, gold had a great 2024, whether it can continue into the new year remains a question. In our view, gold has acted like a hedge on global uncertainty and conflict. Given our concerns about continued uncertainty in places like Ukraine and the Middle East, oil seems to be in flux with Middle Eastern conflict raising supply concerns, but economic weakness and slowing global trade are lowering demand.

The world is becoming increasingly more complex, and we continue to endeavor to chart a course, avoiding pitfalls if possible. If you have any questions about your portfolio or concerns about something going on, please don’t hesitate to reach out to talk.

As always, we appreciate your trust in us and are looking forward to a great 2025. From all of us here at Sullivan & Associates, we wish you and your family a happy, healthy, and prosperous new year!

Kevin P. Sullivan, CFA, CFP®, AIF

View My Website