In many ways 2024 was a goldilocks year. Consensus heading into the year called for three Federal Reserve rate cuts, cooling inflation, and resilient growth in the U.S. From an economic perspective, that is exactly what we got. Despite concerns about valuation, this mix was just right for the S&P 500, which responded by rallying 25%, marking a second consecutive year of 20%+ gains – a feat not seen since 1999.

While it would seem many investors would have reason to celebrate, those gains accrued only to a small portion of the market. Bonds saw muted returns as interest rates on the longer end of the curve actually rose. International equities and emerging markets failed to keep up as a stronger U.S. dollar offset price gains, leaving U.S. based investors with mid-single-digit total returns. Even within the S&P 500 the “Magnificent 7”[1] delivered an average return in excess of 57%, while the remaining 493 stocks returned an average just under 15%. Private equity strategies, which have provided premiums to public market[2], lagged as M&A and IPOs volumes have yet to return to previous levels. Investors who exercised any level of prudent diversification may be wondering when the rest of the market will respond in kind.

Looking ahead to 2025, investor attention remains on the Federal Reserve and their path to a neutral rate environment, but increasingly fiscal and governmental policy has come into focus. A change in presidential administration with dramatic policy proposals around immigration, spending, and foreign policy looms large. In this annual outlook note, we set the stage for our view of the macroeconomic backdrop, the potential impacts of policy proposals, and highlight a number of key themes that we believe will drive markets and investor returns in 2025 and beyond. See these articles to explore:

2025 Economic and Market Outlook
2025 Outlook: Policy Implications Into 2026
Key Investment Themes & Opportunities for 2025