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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.

It took two full years for the stock market to finally reach new highs. After the recession worries of 2022 and a steady recovery in 2023, the S&P 500 finally hit new highs this January.

In 2022, interest rates hit levels not seen in 20 years and the conventional wisdom on Wall Street called for a recession to arrive in 2023. As a result, the stock market realized a bear market drawdown of 25%. However, the economy proved resilient, and the employment situation remained strong.