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U.S. Economic Growth Continues but Uncertainties Remain

John M West III, MBA, CFP®

The dawn of 2024 started with tremendous uncertainty. An economic recession was nearly a foregone conclusion, and the Federal Reserve was expected to cut rates a half-dozen times to help stimulate the economy and hopefully provide a soft landing. However, a recession never materialized, and as 2024 came to a close, it shaped up to be a year of fairly robust growth in the U.S., with annualized GDP growth of nearly 3% and a consumer that remained strong. In fact, the economy grew by 12.6% during the Biden administration while creating 16 million jobs and the lowest average unemployment rate of any presidency. This was despite a year marked by historic elections and continued global unrest.


As the clock struck midnight on 2024, people in more than 60 countries around the globe and nearly 50% of the world’s population had gone to the polls. Many countries elected new leaders, including Mexico and the United Kingdom. Of course, the U.S. elected former President Trump to a second term. Military conflicts expanded as fighting between Israel and Hamas spread, and the Russia-Ukraine war entered its third year. There were also several devastating natural disasters, including hurricanes, floods, fires, and earthquakes, that rocked the planet. Even with this global uncertainty and countless recession warnings, the markets continued to climb the wall of worry to record highs. The S&P 500 notched record closes as the economy remained healthy, inflation ticked lower, the Fed started cutting rates in August for the first time since 2020, and big tech stocks powered higher.


As we enter 2025, global uncertainty remains high once again. A recession is not something we are anticipating, but the current outlook is clouded by unusually high ambiguity surrounding immigration reform, trade, and tax policy. Additional tariffs will slow the economy, and mass deportation will lead to higher inflation. On the other hand, lower taxes and deregulation are stimulative, which should help economic growth. At this point, all of these items are on the table but are still merely campaign promises that will have opposite effects on the economy. Nevertheless, what will actually become law remains to be seen. The Fed would like to continue cutting rates as warranted, but not too much or too soon like they did in the early 70s. (See 2nd Quarter 2024 Commentary, What’s the Rush?) The Fed will continue to take a measured approach to lowering rates based on the economic data but may not be able to lower rates as anticipated just a few weeks ago based on a potential uptick in inflation.


Overall, we remain optimistic about the economy as jobs are still plentiful and interest rates are coming down, which will help consumers looking to borrow. The concern is expensive equity valuations, particularly in large-cap technology stocks. Due to all of the uncertainty, we anticipate additional volatility until the economic uncertainty lifts. It comes back to maintaining a portfolio allocation that fits both your short and long-term investment goals and can weather any economic storm that might arise. We look forward to chatting with you, discussing your planning goals, and navigating 2025. Happy New Year!

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