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Stocks are rallying hard as the economy refuses to buckle. Will it last in 2025?


US stocks have been powering to fresh record highs in the final leg of 2024, with investors getting a second wind from promises of deregulation, tax cuts and tariffs from a second Trump administration and its "America first" agenda.

everyone is participating in the parade," Gordon said, adding that the economic and stock-market story now looks more in harmony.

Still, not knowing the extent of Trump's aggressiveness on tariffs or immigration remains a risk in 2025.

In a sign that Trump could revive a "fly-by-night" approach to policy, Gordon said drawbacks could arise if late-evening posts on social media that threatened 25% tariffs good from on Canada and Mexico become the norm.

“That doesn't mean markets go down, but it brings back volatility as a bigger risk,” Gordon said.

Trump's threats to restrict immigrant labor also risk pinching labor supply and growth, and down the line could become a "big wet blanket" on confidence, Gordon said.

Why cut rates more?


The Fed already has lowered it policy rate by 75 basis points since September, bringing it to a 4.5% to 4.75% range, with another cut of 25 basis points possible in December.

“When we look at today, where equity markets have gone and at financial conditions, there isn't a real strong case that we need to lower rates really quickly at this point,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

The economy has kept growing at a strong 2.8% pace when looking at third-quarter gross domestic product. The hope is that risks from additional Trump tariffs and related policies could be dialed back before they risk adding to an already large US debt load.

“It's possible that growth could be even stronger next year,” said Jim Baird, chief investment officer at Plante Moran Financial, which he views as great news for equity markets, even if it could lead to fewer Fed rate cuts.


"What we've seen," Baird said, was that "a majority of Americans got what they wanted out of the election," pointing to resilient consumer sentiment, a stronger stock market heading into year-end and portfolios rising in value.

All three major stock market gauges ended lower ahead of Thanksgiving, but with the S&P 500 index SPX up 25.8% on the year, Dow Jones Industrial Average DJIA 18.7% higher and Nasdaq Composite Index COMP on pace for a 27% yearly gain.


In November alone, the Dow was on pace for a 7.1% gain ahead of Black Friday, putting it on pace for its best month since October 2022, according to Dow Jones Market Data.