What Does 2025 Have in Store for Us?

As we reflect on 2024 and prepare to gaze into the future, let’s begin with a quick recap of the year that was:

2024 delivered an unexpectedly strong performance in public markets. Interest rates, as measured by the 10-year Treasury, remained relatively stable in the 4-4.5% range—marking a shift from the volatility of prior years, when rates jumped by a percentage point or more annually. This stability, coupled with the Federal Reserve’s downward adjustments to short- term rates and year-end promises of deregulation, set the stage for equities to soar, delivering a stellar follow-up to 2023.

A Republican election sweep introduced significant political changes, including the anticipated departure of Lina Khan (FTC Chair) and Gary Gensler (SEC Chair), both viewed as restraining market growth. Meanwhile, Jerome Powell’s commitment to remain at the helm of the Federal Reserve provides continuity in monetary policy.

Political shifts have already made waves, with the most recent government funding bill (continuing resolution) scrapped in dramatic fashion, drawing a flurry of public commentary. The newly formed Department of Government Efficiency (DOGE) promises high-profile debates on spending—what some are already calling “Vivek & Elon vs. Inflation.” We’re watching this political tug-of-war as closely as any headline-grabbing boxing match!

As we enjoyed the holiday season with family and friends, the perennial question surfaced: “What’s in store for markets next year?” Let the prognostication begin:

The Economic Outlook

Despite years of recession predictions, the U.S. economy has remained resilient. While risks always exist, there are no clear signs of a significant downturn on the horizon.

Portfolio Strategy for 2025

Here’s how we’re positioning portfolios in light of the current environment:

Fixed Income: We continue to favor the belly of the yield curve, focusing on intermediate-term bonds to lock in yields around 5% (or slightly higher in the municipal bond space for those in higher tax brackets). Credit quality remains paramount, as credit spreads are near historic lows. Stick to high-quality issuers or those you know exceptionally well.

Equities: After the strong gains of 2024, it’s time for some portfolio adjustments. We’ll use early 2025 to trim positions in high-valuation areas and redeploy capital into laggards with solid potential. While we don’t anticipate a repeat of 2023 or 2024’s remarkable performance, we remain cautiously optimistic, adhering to the time-tested maxim: “Don’t fight the Fed.”

Alternative Investments: In an environment marked by fast evolving market conditions and potential volatility, alternative investments will continue to play a vital role in portfolio construction. Assets such as private equity, private credit, real estate, and infrastructure provide opportunities for diversification, potential downside protection, and access to non-correlated returns. As we look to 2025, we remain committed to identifying high-quality alternative strategies that align with your long-term financial goals and complement traditional asset classes.

Trade Policy and Tariffs: There is growing speculation about the potential reintroduction of tariffs or changes to existing trade agreements. If enacted, these could impact sectors reliant on international supply chains, such as technology, consumer goods, and industrials. While the details remain uncertain, we will monitor developments closely and adjust portfolios as needed to help mitigate risks and attempt to capitalize on opportunities.

A Fond Farewell

As we turn the page to 2025, we must bid a heartfelt farewell to Mariana, our steadfast colleague and friend, who is retiring after 17 years of dedicated service. Mariana has been a cornerstone of our client-facing team, known for her humor, candor, and unwavering commitment to excellence. If you visit our office, her legacy lives on in her beautiful artwork—the four-panel butterfly display in our conference room.

We wish Mariana a long, happy, and healthy retirement with her family.

If Mariana was your primary point of contact, rest assured that our team is ready to assist. Please reach out to us at bermontOPS@raymondjames.com to connect with Jesus, Kim, Danay, or our soon-to-join team member, Kevin.

Closing Thoughts

As always, we are deeply grateful for the trust you place in us to guide your financial journey. We look forward to navigating the opportunities and challenges of 2025 together.

Wishing you and your loved ones a prosperous and joyful new year.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investments mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. Any opinions are those of Peter Bermont & Michael Gold, not necessarily those of Raymond James.