Our 2025 Market Outlook: Insights for the Year Ahead!

Hi Friends and Happy New Year!

As we welcome in 2025, we are excited to share our outlook for the year ahead. We love working with all of you and look forward to another great year together.

We wanted to discuss 3 key questions and use clues from history as our guide.

First, can stocks continue to perform well for the 3rd year in a row after back-to-back 20% gains?

Yes, history suggests they can. Since 1950, the S&P 500 has achieved two consecutive years of 20%+ gains eight times. In six of those instances (or 75% of the time), the market went on to finish positive in the third year. The average and median returns were both around 12%. While the past doesn’t guarantee the future, this solid track record gives us reason to be optimistic.

Second, should we stay diversified, even when the S&P 500 has outperformed the other major asset classes for two years in a row?

?

Absolutely, we should remain diversified. This chart from JP Morgan illustrates the performance of different asset classes over the years. It’s a helpful reminder that market leadership changes frequently. Over the past 40 years, the S&P 500 was the top-performing major asset class in only six years. The last time it led for two consecutive years was in 1987 and 1988. After that, it took more than 30 years—until 2019—for the S&P 500 to claim the top spot again.

By remaining diversified and regularly rebalancing, we are well positioned to capture opportunities across asset classes while managing risks.

Finally, are we prepared for a potential market decline in 2025?

Yes, we are.

Yes, we are. Historically, the average intra-year market decline over the past 44 years has been 14.2%, according to this chart from JP Morgan. Interestingly, the market hasn’t experienced declines of this magnitude in the past two years. That’s why we anticipate a more significant pullback could occur in 2025, even if the market ends the year positive.

Being prepared is key. We’re confident in your financial plans, which are designed to be flexible and resilient. If the market gives us a more significant temporary decline, we are ready to take advantage of it by rebalancing and adding to stock.

We remain optimistic about the market and deeply confident in our clients’ financial plans. At the same time, we believe in staying diversified, regularly rebalancing our portfolios, and being prepared for whatever opportunities and challenges the year may bring.

Thank you for your trust and partnership. I look forward to talking with you next Friday and for a great year ahead together.

Watch the full video of this week's Financial Planning Fridays, and subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.