Market Insight

As 2025 begins, investors appear confident and eager to embrace the business agenda proposed by the Republican party and the President-elect. Since the election in early November, equities have continued to rally while interest rates have moved only marginally higher. Following a very profitable year for both stocks and bonds in 2023, investors were delivered another quality year, though fixed income returns have moderated as of late. Stocks on the other hand, as measured by the S&P 500, have set 57 new all-time highs this year, 10 of which have occurred since the election. Through mid-December, nearly every major domestic equity index has produced double-digit returns year-to-date, with large-cap growth leading the way once again. United’s Investment Committee’s decision to increase the weighting in domestic growth equities has proved timely and rewarding.

It is worth noting equity returns have been exceptional since the lows reached in October of 2022. Looking back, the two plus years of well above-average returns need to be factored in as we look forward. The first year of the Presidential four-year cycle is often volatile and can produce lower returns. History also shows that when one party controls both the Executive and Legislative branches, financial markets are somewhat less profitable. While corporate earnings estimates are expected to set record highs next year, we think investors have priced in some, but not all, of this future earnings growth. Stocks should continue to be a leading asset class but with some modest reduction in return expectations compared to years’ past, emphasizing the need for a well-diversified portfolio and sound investment advice.