Buckle Up: Financial Market Update
Economic Growth Defies Expectations
As we entered 2024, economists widely predicted a slowdown in the U.S. economy. However, resilient consumer spending and AI-driven private investment led to unexpected growth. Current estimates suggest the U.S. economy expanded by 2.8% in 2024—nearly double the expected pace.
Key Drivers of Economic Growth:
Consumer Spending: Grew by nearly 3% in 2024, fueled by a 4.1% unemployment rate and 3.8% wage growth.
Federal Reserve Policy: The Fed kept interest rates steady for most of the year before implementing a 0.5% rate cut in September, followed by 0.25% cuts in November and December.
Strong Performance in Risky Assets
Cryptocurrencies and Growth Stocks led market gains in 2024. The launch of Bitcoin ETFs and other digital asset funds helped drive mainstream adoption. Meanwhile, Artificial Intelligence (AI) stocks continued to dominate the growth sector.
Cash Holdings: A Missed Opportunity?
Despite high-yield savings accounts offering over 5% returns, holding cash was not the best investment strategy in 2024. Many investors who chose cash over stocks missed out on significant gains across equities, crypto, and alternative investments.
2024 U.S. Election: Historic Shifts and Market Impact
The 2024 U.S. Presidential Election was one for the history books. Here are some of the key takeaways:
First sitting president to drop out since 1969
Largest campaign spending in U.S. history: $16 billion
Second-highest voter turnout since 1900
First Republican to win the popular vote in 20 years
First president to win a non-consecutive term since 1892 (Grover Cleveland)
Trump’s Second Term: What It Means for the Economy
On Day 1, President Trump signed 26 executive orders impacting key areas such as:
Energy policy (expanding fossil fuel exploration)
Government efficiency and deregulation
Withdrawal from the Paris Climate Accord and WHO
Changes to immigration policies
Revisions to diversity, equity, and inclusion (DEI) programs
Sector Performance: Where Should Investors Focus?
During Trump’s first term, the best-performing stock market sectors were:
Technology
Consumer Discretionary
Healthcare
This time, Wall Street is optimistic about the financial sector, anticipating policy shifts that could benefit banks and lending institutions.
Trade, Taxes & Market Volatility: What Investors Should Expect
Like the first term, Trade and taxes are big areas of uncertainty with this administration.
The Republican-led administration is advocating for an economic strategy focused on domestic growth, emphasizing:
Lower taxes
Reduced immigration
Higher tariffs on imports
While these policies could accelerate economic growth, they may also contribute to inflation and an expanding U.S. budget deficit. As a result, market volatility is expected to rise, and the risk of a recession is increasing.
For a more in-depth analysis, check out our podcast Episode #206 – "Buckle Up: Financial Market Update": 🎧 Listen on Spotify
Investment Disclaimers & Risk Considerations
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Momentum Advisors, LLC-“Momentum”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Momentum.
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Chart Sources:
Goldman Sachs Research, JP Morgan Research and Statista.com
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