As we move deeper into 2025, investors are watching several key market trends, including AI’s impact on valuations, shifting interest rates, and evolving government policies. In a recent discussion, our team at Opes Wealth examined the market performance of 2024 and looked at what’s ahead for the market and portfolios this year.
2024 Market Recap
Last year saw strong U.S. stock performance, with large caps rising 25% and mid- and small-cap stocks posting double-digit gains. The international market, however, lagged — developed international returns were a modest 3.8% while emerging markets returned 7.5%. Bonds had mixed results, with U.S. bonds posting positive returns while non-U.S. bonds declined due to a stronger dollar.
Central bank policies diverged globally. The U.S. began lowering interest rates, though not as quickly as Europe, while Japan started raising rates. Additionally, the new U.S. administration is expected to focus on trade, immigration, tax policy, and deregulation:
- Trade and immigration shifts may be inflationary, potentially reducing the labor force and increasing friction on imported goods.
- Lower taxes and deregulation could support economic growth by removing certain constraints from the economy.
2025 Investment Themes and Portfolio Strategy
The Federal Reserve remains data-driven, monitoring inflation, employment, and policy changes. Momentum in the U.S. stock market remains strong, however, large-cap valuations have been stretched by AI enthusiasm. Diversification and risk management will be critical to navigating this evolving economic and market environment.
Given this, we’re making strategic portfolio adjustments, alongside our regular rebalancing. Portfolios are shifting toward U.S. mid-cap stocks, which offer stronger domestic revenues, reasonable valuations, and solid balance sheets.
Is Your Portfolio Ready?
Now is the time to align your investment strategy with market trends and financial goals. Take our assessment to evaluate your financial standing.
