All That Matters: Post-Election Roundup
Looking towards the future
Ross: As we look ahead to 2025, I think the big focus for either candidate was going to be expiring provisions of the Tax Cuts and Jobs Act. There will be ongoing analysis on whether these provisions will be extended, and what that will look like. We have a policy team at Strategas, and tax planners and wealth planners in Baird’s Wealth Solutions Group that are equipped to help our clients navigate through these policy implications. While that’s going to be a big topic, that’s more of an individual consideration and has less importance for the market.
Outside of that, the things that mattered this year are going to continue to matter next year. Questions like, are AI investments going to pay off? Will earnings continue to grow? What is the Fed going to do? These are the things that drove the stock market to record highs in 2024, and will continue to be a focus in 2025.
Mike: I’m going to make a prediction that might sound crazy coming from a long-term optimist like me: in the next four years, I think the U.S. stock market will experience a bear market. Why? Because every single president dating back to Herbert Hoover has had a bear market, and I think that’ll continue to stand true. During his term, Donald Trump will be sitting in the White House and something crazy will happen in the world that he’ll have to respond to, and the market will not have seen it coming and will react. So I think we’ll have a bear market, just like all previous presidents in recent history have had a bear market.
We always try to convey that some worries about the future are more important than others. When it comes to the national debt, it should be low on your list. But other news items like interest rates or the corporate tax rate may rise to a top priority.
Ross: Just because profits and the stock market have gone up over time does not mean there will not be extreme bouts of volatility. We see that stock prices are often more volatile than the companies we’re invested in, because it’s people who are trading stocks and there’s emotion at play. History shows us that stocks go up over the long term, but only if we can ride out a series of volatile short terms. Case in point: President Trump’s first term had two bear markets, and yet stocks were closing at all-time highs when he left. That’s the state of play.
Mike: As long-term bulls, we know that the stock market and the economy grows over the long term, but we acknowledge that there are bear markets along the way. Past performance is no guarantee of future results. I wish I knew when the next bear market would be, but all we know is it will be a surprise. Our best advice is to stay focused on your plan – not others – and stay close with your Baird Financial Advisor who will help you weather any storm that comes our way.
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