Market Perspectives Q1 2025

by Kieran Osborne, MBus, CFA®, Chief Investment Officer

February 11, 2025

Insights from Q1 2025

Stocks have been buoyed by an increasingly supportive economic outlook, better fundamental growth than previously anticipated, reduced inflation, and the Fed beginning a rate-cutting cycle. However, the recent repricing of Fed rate cut expectations, Artificial Intelligence-related headlines, concerns over market concentration and stretched mega-cap tech valuations, and tariff announcements have caused some recent volatility. Bond yields are currently relatively attractive, and the macroeconomic backdrop may support bond prices moving forward.

Read our first Market Update for 2025.

Economic Growth and Market Drivers

The U.S. economy expanded strongly in 2024, and the economic outlook has improved. Robust consumer spending and increases in labor productivity have helped propel growth. Economic data continue to point to positive economic growth and the U.S. economy is expected to grow around 2% for the foreseeable future.

Inflation has trended lower but remains above the Fed’s 2% target. Given the uncertainty surrounding tariffs and the continued economic momentum, we anticipate the Fed will take a measured approach to future monetary policy and may be cautious to cut rates much further. As a result, we expect a higher-for-longer interest rate policy.

Historically, Fed rate cuts have been associated with rising stocks so long as a recession is avoided. That said, we are cautious about valuations and believe recent stock market strength is unsustainable over the long haul. As a result, we expect some moderation in long-term stock market returns. Bond yields are attractive, with many of our preferred bond funds yielding mid- to high-single digits. Moving forward, we believe alternative strategies may offer attractive risk-adjusted return potential.

Download Our Market Perspectives

For a deeper understanding of these market insights and their impact on your investment portfolio, we invite you to explore the full Quarterly Market Perspectives report by selecting the link below. Staying informed and committed to a long-term, disciplined investment approach is key to achieving your financial goals.

For all of this and more, please download our Quarterly Market Perspectives.

Managing Your Investments at Mission Wealth

While we remain constructive on the economic outlook, elevated valuations and market concentration warrant caution. The Fed’s monetary policy decisions will continue to influence market dynamics, and ongoing tariff discussions may add to volatility. As we move further into 2025, we believe a diversified, disciplined investment approach remains the best path to long-term financial success.

For further insights and personalized financial strategies, get in touch with us.

Customized Investment Management Solutions

At Mission Wealth, we develop customized, globally diversified, tax-efficient portfolios tailored to your financial plan and built to stand the test of time. Contact us below for a free portfolio review.

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Investment Advice Fit For Your Needs

At Mission Wealth, we are deeply rooted in an evidence-based investment strategy built on decades of Nobel Prize-winning research. We ignore the media noise and Wall Street hype, relying instead on a long-term approach and proven principles that reward investors over time. For more information on Mission Wealth's investment strategies, please visit missionwealth.com.

To meet with a Mission Wealth financial advisor, please contact us online today or call us at (805) 882-2360.