Weekly Buzz: 🔮 What's in store for 2025?

Despite fears of a recession, the global economy proved remarkably resilient in 2024 – central banks largely contained inflation without crushing growth, markets reached new highs, and the US economy maintained its momentum. So what's on the horizon for 2025?

A quick look at the year ahead

Goldman Sachs feels optimistic for the upcoming year. The investment bank forecasts worldwide GDP expanding 2.7% this year – just above the consensus estimate from economists surveyed by Bloomberg. For the US specifically, they project 2.5% growth, see inflation cooling to 2.4%, and expect the Federal Reserve to gradually lower interest rates to 3.25-3.5%.

Those projections, however, assume new US tariffs will only target China and auto imports – a far gentler scenario than broad-based tariffs that could put the brakes on global growth. In fact, Goldman estimates that a 10% across-the-board tariff could push US inflation back up to 3% and subtract as much as 1% from GDP growth. Then there's the risk of stricter immigration policy in the US, which could be an even bigger drag on the economy.

One factor supporting an optimistic outlook is the continued advancement of AI. While the past two years have mostly seen personal experimentation with AI (think chatbots writing poems), 2025 could mark the start of widespread AI adoption in business processes. Our own 2025 Macro Outlook next week will dive into more detail on this, and other factors that will be key this year and beyond.

What’s the takeaway here?

Signs point to a solid year ahead for investors. But if market history has taught us anything – from 2021's euphoria to 2022's slump to 2023's rebound – it's that being prepared for different scenarios is often the wise choice. That's why spreading your investments across geographies and asset classes makes sense (exactly what our General Investing portfolios do). Diversification may not be flashy, but it keeps you on track toward your long-term goals – no matter the twists and turns the market takes.

📰 In Other News: The US economy soared above the political noise

The American economy maintained its pace as it closed out 2024, with third-quarter GDP growth now revised upwards to 3.1%. Consumer spending, which drives about two-thirds of economic activity, grew at its fastest clip since early 2023 at 3.7%. Overall employment remains healthy, though an uptick in continuing unemployment claims hints at some softening around the edges.

But while the US economy was doing push-ups, Washington was more interested in playing political tug-of-war. Over the last weekend, Congress narrowly averted a government shutdown through a last-minute funding bill – passed despite President-elect Trump's demands for a five-year debt ceiling extension and internal Republican disagreements.

This disconnect between Wall Street and Washington tells an important story. While political showdowns can create short-term market jitters, they tend to generate more headlines than economic impact. Over the long term, markets care more about fundamental drivers like consumer spending and employment trends than any temporary political gridlock.

🎓 Simply Finance: Gross domestic product (GDP)

Gross domestic product (GDP) measures the total value of all goods and services produced within a country during a specific time period, typically a year. Think of it as adding up everything a nation creates – from cars manufactured to haircuts given. A higher GDP indicates more production, more jobs, and potentially a higher standard of living – a key indicator for how well a country's economy is doing.