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In 2025, the U.S. stock market realized a third year of positive results – all three with double digit positive returns. The year did include a 19% drawdown in stocks after the Liberation Day tariff announcements. Despite the bumpy ride, the S&P 500 finished the year up a healthy 18%.

In January 2024, our commentary titled “Vibecession” described a period where widespread pessimism did not match up with the relatively strong economic situation. Economic writer Kyla Scanlon coined the term, describing an environment where consumer sentiment was low while most financial indicators remained positive. It seems that this feeling of malaise exists again today.

Since February, financial markets have been quite volatile as investors grappled with the numerous changes coming from the Trump Administration. The main source of volatility was a major reset to global trade, with significant uncertainty over the approach, endgame and impacts on the economy.

The swift and unprecedented tariff and trade policy has created significant uncertainty and large swings in the U.S. stock market. As noted in our January commentary, the strong returns of 2023 and 2024 increased the likelihood of a larger drawdown in stocks in 2025.

The economic outlook for 2025 is marked by a delicate balancing act with global economies navigating persistent inflationary pressures, rising interest rates, and shifting labor market dynamics.

After two years of flat markets, the U.S. stock market reached new highs in 2024. Recession worries in 2022 did not materialize, and the economy navigated the highest interest rate environment since 2000.