Elmwood Wealth: 2025 Market Outlook

We enter the new year with several investment themes that stand out and will help shape our investment strategy moving forward. Though there are additional factors to take into consideration, we feel these noted below have the potential to be the most impactful on 2025 investment returns. 

Executive Summary

1) Domestic stock markets look poised for positive gains again in 2025. The most attractive returns we expect will revolve around a more diverse set of companies, particularly those that are smaller in size.   Earnings growth of non ‘Mag 7’ companies will accelerate in 2025 as compared to 2024. 

2) The AI revolution is poised to continue its rapid progress over the next 6-12 months, yet its growth will also broaden out to areas further to Nvidia and semiconductor companies.  The need for additional data centers and power to supply them takes center stage and will require vast amounts of capital. 

3) Interest rates will remain a volatile component of our economic and market backdrop, leading to more active management and requiring a more diverse set of investments utilized.  Short-term rates are trending downward, and this will continue to benefit the economy and stock markets.

4) Private market investments look increasingly attractive and currently have favorable risk and reward characteristics. These markets provide improved diversification while improving the probability of achieving positive performance.  Private companies continue to outnumber and grow relative to public market companies.

5) Potential risks to a positive outcome center on inflation. Should we impose excessive tariffs, consumer prices may rise and impact GDP growth by roughly .50%. If we over-stimulate our economy through other corporate friendly measures, then inflation may rise again leaving the Federal Reserve no choice but to raise interest rates again to tamp down on growth. 

If you would like to delve into any of these topics, or have something else top of mind, please don’t hesitate to reach out. We would welcome the conversation.

_{DISCLAIMER: Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this (article) serves as the receipt of, or as a substitute for, personalized investment advice from Elmwood Wealth Management. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.}