Happy New Year!

With 2025 officially underway, I'm sharing key updates and commentary on:

• The State of Consumers
• The State of Companies
• The State of Investing

In a world saturated with primarily negative "breaking news," it can be challenging to maintain the long-term perspective necessary for successful investing.

I hope today's email provides a helpful perspective as you continue the pursuit of your retirement goals.

Enjoy!

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1) The State of the Consumer

Growth in Household Net Worth Has Been Astounding

Collectively, the American consumer is in the best financial shape they have ever been, with household net worth reaching a record $160 trillion at the end of Q3 2024.

Even more staggering, since the start of 2020, household assets have increased by $53 trillion while liabilities have increased by just $4 trillion.

In other words, for every $1 of debt households have taken on, assets have increased by an incredible $13!

The Economy Is Rolling (And That’s Been Good for Consumers)

The U.S. Gross Domestic Product is estimated to have increased by a real rate of 2.7% during 2024.

This growth was largely due to our persistently low unemployment, wages outpacing inflation, and consumers spending more—the combination of which almost nobody expected as the Fed began hiking rates two years ago.

Good News About Interest Rates and Inflation

Interest rates and inflation impact nearly every consumer, and there was good news on both fronts in 2024.

The Fed lowered rates by a full percentage point during the latter half of the year; notably, most other central banks were also cutting rates.

This was possible because inflation remained relatively stable throughout the year while slowly approaching the Fed’s 2% target.

The big question heading into 2025 is whether inflation will remain relatively benign or re-accelerate as it did in the 1970s.

Let’s all hope for the former. 😊

2) The State of Companies

Corporate America Is Doing Quite Well

​Earnings growth for the S&P 500 is expected to be 10% in 2024.

Even more impressively, the estimated Q4 year-over-year earnings growth will be 11.9%, the highest earnings growth reported by the index since 2021.

Corporate America seems to be doing quite well despite all the apocalyptic predictions.

Worker Productivity Is Booming

Although this upcoming note might appear dull, worker productivity plays a crucial role, impacting both the company's profits and broader economic development.

According to the Wall Street Journal, productivity has increased by 2% or more for five consecutive quarters.

More interestingly, the WSJ also noted that raising worker productivity growth by just 0.5% could reduce our debt-to-GDP ratio to a much more manageable 108% over the next decade rather than the currently expected 116%.

3) The State of Investing

57 New All-Time Highs

The biggest news in investing this past year has to be that the market (S&P 500) attained 57 new all-time highs, resulting in a total return of more than 25%!

With about 250 trading days per year, this means that about 22% of all trading days end at an all-time high—that’s an average of more than one new all-time high per week.

That’s impressive for a year in which the “experts” largely forecast a pretty average year.

So much for forecasting. And “experts.”

It’s Not Just Large Cap U.S. Equities That Did Well

As noted in the returns section above, most major equity indexes experienced positive returns last year.

That includes small caps, developed international markets, and emerging markets, but the positive returns didn’t end there.

Real estate, commodities, gold, cash, the U.S. dollar, and even bonds all offered positive returns.

Given this backdrop of returns, it was surprisingly easy to make money in 2024.

The Tough Road for Bond Investors Continues

While bonds did eke out a nominal positive return of a paltry 1.8% in 2024, the real return (after inflation) was negative.

If that’s not enough to be dour about, it’s notable that bonds remain in a historic 52-month drawdown.

This is the longest drawdown in half a century, with the next longest streak being a comparatively short 16 months.

It will be interesting to see how long this lasts.

Bottom Line

As we step into 2025, the economic and investing landscape offers a blend of optimism and caution.

Consumers and corporations alike have shown remarkable resilience, with household net worth and corporate earnings reaching record highs.

Meanwhile, the investing environment in 2024 demonstrated robust opportunities across diverse asset classes, despite ongoing challenges in the bond market.

Maintaining a long-term perspective amidst the noise remains essential as we navigate the uncertainties ahead.

Here’s to staying focused on your retirement goals and making 2025 a successful year!

Stay wealthy,

Taylor Schulte, CFP®