I hope your start to the new year has been going well and that you made some special memories with your loved ones over the holidays. For my part, please know that it was a joy to serve you last year, and I greatly look forward to working with you in the year ahead!
As we step into 2025, I thought it would be beneficial to take a moment and reflect on what an extraordinary year 2024 was for investors.
[Not interested in market commentary? Skip to the postscript for a fun fact about 2025.]
President Trump has won reelection; what does that mean for investors?
Let's discuss.
As of this writing, Republicans have won the White House and a Senate majority, and may win a House majority. (1)
Markets reacted to the news by rallying to new record highs. (2) Does that indicate they see president-elect Trump's promises as favorable for stocks? Or is it simply a reaction to an end to election-related uncertainty? History can offer us some clues.
What do presidential elections mean for your portfolio? Should you change your investing strategy based on who wins? Elections bring a lot of noise, and I wanted to dispel some market myths around this election.
Myth #1: Elections usually bring big market swings.
You would think elections cause major market shifts (given all the politicking and intense emotions). However, history shows that elections historically don't influence market performance as much as the economy does.
The Federal Reserve recently voted to cut interest rates, shaving 0.5% off the benchmark . (1)
Markets rallied exuberantly at the news, reaching new highs. (2)
Why did the Federal Reserve cut rates?
With inflation on a strong downward trajectory and concerns about economic weakness rising, the Fed clearly decided now was the right time to cut. The size of the cut was a surprise to many, who expected a quarter-point cut and could indicate that the Fed feels strong action is warranted. Some analysts believe lowering interest rates will lower the risk of a recession and increase the odds of a “soft landing” for the economy. (3)
