LPL Financial Research Outlook 2025:
Pragmatic Optimism
A message from their CIO:
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 Financial Research
Outlook 2024: A Turning Point
In 2024, WE BELIEVE MARKETS will make a definitive turn to a more recognizable place. En route, the transition will be marked by meaningful shifts in a few key areas. Inflation is going down. The risk of a recession is bubbling up again as the effect of post-pandemic stimulus wanes. And the end of the Federal Reserve’s (Fed) rate-hiking campaign is indeed upon us.
Where the last two years had investors focused on inflation, market volatility, and striving for a sense of economic balance, we now can expect to see some return to the previous status quo—that is, a less-stringent Fed, normalizing inflation, and a slowergrowth environment. We’ve seen indications of this reset—receding inflation, rates stabilizing, more modest equity market performance, and go-forward economic forecasts that have been dwindling. From our perspective, this turning point for the markets and economic landscape can be characterized as a return to familiar economic and market patterns, leaving behind the volatility of policy and economic swings experienced in recent years, and moving toward a steadier environment.
All of this said, it doesn’t mean that 2024 won’t have its own surprises or potential challenges. Reflecting on 2023, we certainly experienced our fair share of unexpected events. There was positive news: The U.S. economy was strong and the stock market performed relatively well, despite the Fed tightening monetary policy and raising interest rates. On the downside, we faced a regional banking crisis driven by interest rate risk and saw escalating conflict in the Middle East, reminding us that markets are seemingly constantly overcoming obstacles.
LPL Research’s Outlook 2024: A Turning Point provides insight and analysis into next year’s opportunities, challenges, and potential surprises. We understand that making progress toward long-term financial goals requires a strong plan and sound advice. The insights in this report, combined with guidance from a financial professional, will help position investors to navigate this turning point and work toward achieving their objectives
LPL Financial Research
Outlook 2023: Finding Balance
Through all the challenges, newfound opportunities, and every high and low we’ve experienced during the last couple of years, it’s no surprise why we might be striving for more balance. Whether it’s about the markets and global economy or what’s happening in our local communities, the news we’re hearing on a daily basis has the potential to disrupt the balance of our lives. But with resilience, perspective, and the support of close connections, we can navigate through it all and regain our sense of equilibrium—even after another dizzying year, as 2022 proved to be.
After two years of disruption due to the COVID-19 pandemic, we were searching for some kind of return to normalcy, while at the same time, still experiencing the aftereffects of the pandemic. Some of those aftereffects included the imbalances created by the fiscal, monetary, and public health policy put in place to address the pandemic—and the process of addressing those imbalances has been disorienting at times. If 2022 was about recognizing imbalances that had built in the economy and starting to address them, we believe 2023 will be about setting ourselves up for what comes next as the economy and markets find their way back to steadier ground—even if
the adjustment period continues.
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