Summary
The long-term trend in the US stock market was higher. In the more than four decades since Ronald Reagan became president in 1980, stocks have delivered profitable performance almost 80% of the time. The average annual profit was 13%. This year was another winner as stocks continue a bull market in 2024 that started in October 2022. The rally was fueled by falling inflation and fueled by lower interest rates, continued economic growth and rising corporate profit growth rates. But despite the historical trends, there is no guarantee that 2025 will also be a whistleblower. The start of the year could be difficult as the Fed grapples with persistent inflation, the employment environment may weaken from a historically strong position and geopolitical issues remain simmering. But earnings growth is expected to accelerate to low double digits year on year in the first half of the year. And should inflation resume its downward trend, giving the central bank more room to cut rates, the outlook for the second half should improve. We think the stock market in 2025 will take signals from two sources. First is the Fed, which has been driving this second phase of the bull market since the interest rate outlook took hold. In second place is profit growth, which is already solid but could get a boost in 2025 from Donald Trump’s new policies. It is at least a modest consolation that the