Pragmatic Optimism
Looking back on 2024, it clearly echoed many of the themes from 2023. There were some brief economic growth scares along the way, but by and large the broader economy continued to defy expectations and surprised once again to the upside. Stocks continued their strong performance, and the S&P 500 is on track to record its second consecutive year of 20% plus returns as powerful trends in artificial intelligence (AI) and technology have proceeded unabated and largely overshadowed other factors like election uncertainty, continued geopolitical tension, and some rich stock valuations. After the election, the anticipation of potentially market-friendly policies from the incoming administration also helped bolster stocks. The bond market, in contrast, experienced another lackluster year. While the Fed initiated a long-awaited easing cycle, policy ambiguity and uneasiness over rising debt levels led to increased volatility in bonds, but no clear directional trend.
As we look ahead to 2025, we remain cautiously optimistic. Cautious because we know that no market environment is ever permanent, and that change is always potentially around the corner. Optimistic because we recognize constructive long-term technology trends are in place. Plus, potential tax policy and deregulation efforts in 2025 could provide some semblance of a tailwind — particularly from an economic perspective. While growth asset returns are not expected to be as robust as 2024, 2025’s investment environment should prove to be favorable for investors.
To better ensure optimal outcomes for investors, our Strategic & Tactical Asset Allocation Committee (STAAC) employs a rigorous and systematic approach to investing. Leveraging proprietary quantitative modeling, our team seeks to identify potential risks and opportunities across capital markets. For 2025, new fiscal and regulatory policies will need to be digested, and relatively rich valuations may get tested. This means equity markets probably won’t be as one-way as they have been. For the time being, this backdrop favors a constructive, but also a conservative and balanced approach to tactical stock and bond allocations.
LPL Research is committed to supporting our advisors, our institutions, and their clients throughout every market cycle. We truly value our partnerships and will always strive to deliver the highest level of guidance and support. We remain incredibly grateful for the confidence bestowed upon us and wish you a very prosperous 2025!
Access the complete 2025 Outlook here.
Disclosures
The opinions, statements and forecasts presented herein are general information only and are not intended to provide specific investment advice or recommendations for any individual. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. There is no assurance that the strategies or techniques discussed are suitable for all investors or will be successful. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Any forward-looking statements including the economic forecasts herein may not develop as predicted and are subject to change based on future market and other conditions. All performance referenced is historical and is no guarantee of future results.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Precious metal investing involves greater fluctuation and potential for losses.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All index data from FactSet or Bloomberg.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy
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Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Investing in foreign and emerging markets debt or securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.
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