Now that President Trump has taken office, investors are sharpening their focus on the administration’s proposed fiscal, immigration, regulatory, and trade policies. We shared our initial thoughts on likely shifts in policy in our Post-Election Economic and Market Outlook back in November. While it remains challenging to predict outcomes given razor-thin congressional margins, we offer this update (as of January 14) on the evolving policy landscape and its potential impact on both the real economy and the markets during 2025 and into 2026.

Markets have seen tremendous change over the last few decades. Twenty-eight years ago, there were over 8,000 U.S. public companies. That number subsequently dropped to less than 5,000. There was also a sharp decline in the number of IPOs, which dropped by over 60% since the 1980 to 2000 period[1]. Meanwhile, the number of private companies increased significantly. Credit markets have also evolved. Private credit has grown from a nascent industry to a $1.6 trillion market in roughly 15 years, surpassing the size of the high yield debt market. Given the significance of these changes, the natural question is, “why?”

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.