As we step into 2025, let’s take a quick look at the three dominant investment themes of 2024.
1. Soft Landing and a Resilient U.S. Economy
Despite global headwinds, the U.S. economy continues to defy recession fears. Supported by robust consumer spending, steady job growth, and moderating inflation, the U.S. economy finished 2024 with Real GDP growth revised significantly higher, from 0.9% quarter-over-quarter to 2.0%; and for 2024 year-over-year GDP revised higher to 2.7% (TheConferenceBoard). Key sectors driving this strong performance include technology, industrials, and consumer discretionary, demonstrating resilience and growth throughout the year.
2. Artificial Intelligence: The Growth Catalyst
Artificial Intelligence (AI) remains a transformative force across industries, driving productivity, innovation, and efficiency. From generative AI in software development to autonomous technologies in manufacturing and healthcare, companies leveraging AI are at the forefront of value creation. Investment in AI-enabling infrastructure, including semiconductors and cloud computing, remains critical for capturing this secular growth trend (barchart). The multi-year investment from companies boosted the AI infrastructure companies throughout 2024.
3. Trump 2.0: Higher for Longer
A second Trump presidency reshaped markets in the fourth quarter as investors weighed the potential impact of his agenda on risk assets. With trade, regulation, taxes, and fiscal spending set to dominate policy discussions in early 2025, markets hit new all-time highs amid shifting expectations. Both the Federal Reserve and investors recalibrated to a higher likelihood of stickier core inflation, driven by a strong economic backdrop, leading to a “higher for longer” interest rate environment (YahooFinance). However, familiarity with Trump’s policies from his first presidency and putting the election in the rearview mirror has reduced uncertainty, allowing investors to plan for 2025 and beyond.
2024 presented a dynamic investment environment where economic resilience and innovation were the key drivers for returns. These themes will likely remain relevant as investors build on the momentum from AI-driven growth, a resilient U.S. economy, and a market better prepared for policy shifts under Trump’s leadership. The resiliency from markets in 2024 sets a solid foundation for navigating opportunities and challenges in 2025.
