Outlook 2025 Summary

Pragmatic Optimism

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Looking back, 2024 clearly echoed many of the themes from 2023. By

and large, the economy continued to defy expectations and surprised

once again to the upside. Stocks continued their strong performance,

driven by powerful trends in artificial intelligence and technology. On

the other hand, the bond market experienced another lackluster year

amid policy ambiguity and uneasiness over rising debt levels.

As we look to 2025, we remain cautiously optimistic. We’re cautious

because no market environment is ever permanent, yet optimistic

since constructive long-term technology trends are in place. Plus,

potential tax policy and deregulation efforts in 2025 could provide

some tailwinds — particularly from an economic perspective. While

growth asset returns are not expected to be as robust in 2025, the

investment environment should prove to be favorable for investors.

To better ensure optimal outcomes for investors, we leverage the

expertise of our Strategic & Tactical Asset Allocation Committee

(STAAC), which identifies potential risks and opportunities. For 2025,

new fiscal and regulatory policies will need to be digested, and

relatively rich valuations may get tested. For the time being, this

backdrop favors a constructive, but also a conservative and balanced

approach, when it comes 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.

Economy

The economy has experienced significant shifts over the last few years, including aggressive rate hikes followed by a pivot to rate cuts, as inflation has come down some. The economy will likely downshift throughout 2025 as consumer spending begins to moderate, though pent-up demand for business capital expenditures, favorable tax policy, and likely deregulation could help offset some of the softening. Inflationary pressures may re-emerge as new policies are digested, so upticks in inflation could lead to changing narratives and a slower pace of Federal Reserve (Fed) rate cuts than expected. The labor market continues to show signs it is slowly shifting and remains key to how the economy ultimately lands.