Presented by John Fitzgerald
It was another resilient year for the U.S. economy. Despite predictions of a slowdown, robust consumer and business spending powered growth in 2024. Although the labor market cooled, it continued to be reasonably strong, and inflation moderated. Ultimately, this led the Federal Reserve (Fed) to begin cutting interest rates in September, signaling progress toward a “soft landing,” an ideal scenario in which the U.S. economy slows enough to reduce inflation but doesn’t enter a recession. Investors prefer this stability, setting a positive tone as we enter the new year.
What to Expect in 2025
This year comes with the usual uncertainties of a new administration taking over in Washington, DC. Although headlines about trade policy could cause concerns, we believe the outlook for U.S. business spending should continue to provide a solid fundamental backdrop in 2025. Corporations are expected to earn more than they did in 2024, with growth likely to spread across industries as business spending broadens.
Key economic drivers. There are two critical components when analyzing the economy—consumer spending and business investment. Together, they create a solid foundation.
Consumers. Consumer spending makes up two-thirds of the U.S. economy. If people have jobs, they have money to spend, driving economic activity.
Businesses. Companies invest to support consumer spending, reinforcing economic growth.
This combination provides the backdrop for a continued soft landing, enabling the Fed to further reduce interest rates in a measured way throughout 2025.
Interest Rates and Earnings
Interest rates tend to affect stock market valuations. In 2022, for example, rising rates contributed to declining stock valuations. Since then, rates have been quite volatile, but 2025 could be a year when corporate earnings—the profits businesses generate—take the spotlight. Lower rates, if achieved, may also provide relief and support equity markets.
Broader earnings growth. The excitement around artificial intelligence and the large amounts of money spent to capitalize on the opportunities it presents have fueled earnings growth over the past several years. That earnings growth, however, has been concentrated in a handful of companies commonly referred to as the Magnificent Seven. A positive economic backdrop in 2025 should allow more companies to generate earnings growth, creating more opportunities across industries.
The bond market. Although equity markets capture headlines, the bond market is particularly intriguing right now. U.S. Treasury yields look attractive, offering strong long-term value. Adding bonds to a portfolio can help balance risk, especially if equity markets encounter a period of volatility.
Political Shifts: Risks and Opportunities
Although the current economic backdrop appears favorable, there are risks. The uncertainty of a new administration always causes concern for investors—and this year is no different. Critical areas to watch include:
Pro-growth policies. Potential tax cuts and deregulation could support economic expansion.
Trade and immigration. Changes in these areas might pose risks by slowing growth or causing inflation to climb again. This combination could complicate the Fed’s soft-landing goal.
Global tensions. Ongoing geopolitical challenges, such as in Eastern Europe and the Middle East, add to the need for careful risk management.
Uncertainties like these accompany all presidential transitions. When you step back and focus on the long term, however, markets have shown remarkable resilience regardless of who’s in the White House. More than six decades of data show stocks have risen over time, no matter which party has controlled the government.
Figure 4. S&P 500 Average 2-Year Post Election Return (Annualized), 1940-2022

Source: Mercer, Bloomberg. As of 12/31/2023. Data is based on past performance which is no guarantee of future results
Staying Cautiously Optimistic
Every year has unique risks, and 2025 is certainly no different. Still, there’s real reason for optimism. Yes, the environment is dynamic, but they key is to stay adaptable, tune out short-term noise, and keep your long-term goals in focus.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Investments are subject to risk, including the loss of principal. Past performance is no guarantee of future results. Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved. This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product.
The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged, and investors cannot invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses.
Bonds are subject to availability and market conditions; some have call features that may affect income. Bond prices and yields are inversely related: when the price goes up, the yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity.
###
Fitzgerald Financial Group is located at 727 East Landis Ave, Suite 1, Vineland, New Jersey 08360 and can be reached at 856-692-0022. Securities and advisory services offered through Commonwealth Financial Network®, member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance.
Authored by Chris Fasciano, chief market strategist, Commonwealth Financial Network®.
© 2025 Commonwealth Financial Network®
A Look Ahead to 2025