Summary
The long-term trend in the US stock market has been bullish. In the more than 40 years since Ronald Reagan became president in 1980, stocks have been profitable nearly 80% of the time. The average annual profit has been 13%. This year was another winner, as 2024 saw stocks extend a bull market that began in October 2022. The rally was sparked by falling inflation and has been fueled by lower interest rates, steady economic growth, and interest rates. rising corporate profit growth. But despite historical trends, there is no guarantee that the year 2025 will also ring a bell. The start of the year may be difficult, as the Federal Reserve battles persistent inflation, the labor environment potentially weakens from a historically strong position, and geopolitical issues simmer. But earnings growth is expected to accelerate to a double-digit rate year-over-year during the first half. And if inflation were to resume its decline, giving the central bank more freedom to cut rates, the outlook for the second half should improve. We believe the stock market will take its cue from two sources in 2025. First, the Federal Reserve, which has been at the helm of this second leg of the bull market since it revolved around its rate outlook. Second will be earnings growth, which is already strong but could get a boost in 2025 thanks to Donald Trump’s new policies. It is at least a modest consolation that the