2024 Year End Review
By Frank Vance
The final quarter of 2024 was indeed newsworthy for many reasons. Appropriate as a capper on the year that was. As we wind down, it’s a great opportunity to reflect on what has transpired, look ahead to prognosticate, and share a few financial planning insights to keep in mind for 2025.
Market and Economic Reflections
Entering 2024, concerns about a potential economic recession and the presidential election dominated headlines. Despite these perceived risks, the stock market displayed resilience, with the S&P 500 delivering an impressive 25% return so far this year (as of 12/27/2024). Greed has replaced fear (which may provide some issues down the road).
On the economic front, the U.S. Federal Reserve has shifted gears by cutting short-term interest rates after nearly three years of tightening policies. Interest rates had reached two-decade highs, and inflation hit levels not seen in four decades. Now, the easing cycle has begun. For 2025, the key question remains: will inflation and economic growth coexist harmoniously, allowing further rate cuts, or will the Fed need to pause to keep growth and inflation in check? The longer duration portion of the yield curve has not been very promising and signals more potential inflation. We believe this “push and pull” of interest rates will be a huge theme in 2025. (We believe rates will not go down quickly and a “new normal” of 4 percent is here to stay).
Reflecting on Five Years of Investment Volatility
As we approach the five-year mark since the beginning of the pandemic, it’s worth recognizing the challenges of navigating investment markets during this period. Investors have faced dramatic swings, with periods of optimism and greed, and darker times like 2022, when the outlook seemed bleak.
Despite the turbulence, equity markets have rewarded long-term investors, while fixed-income and money market accounts now offer meaningful yields—providing a strong foundation for nearly every investor. In contrast to the early days of the pandemic, when there was little alternative to stocks, today’s environment offers more diverse opportunities. Going forward, understanding your risk tolerance and maintaining an appropriate asset allocation will be crucial. (We are maintaining our “neutral” look on equity and like the fixed income asset class as a sold diversifier).
Financial Planning Ideas for 2025
From a financial planning standpoint, we anticipate legislative changes that could impact the tax code and estate planning landscape. Here are a few key strategies to consider:
1.For 1099 and Self-Employed Individuals
Evaluate your retirement savings options. Consider whether a SEP IRA, Solo 401(k), or Defined Benefit Plan might help you maximize tax efficiency and retirement savings. Opportunity exists to defer significant dollars if one looks hard enough.
2. Estate Planning
While the estate tax exemption is unlikely to change significantly in the near term, it remains a controversial topic in Washington. Estate planning should be an ongoing priority. The “new politics” will allow for time to fund trusts, and other vehicles so use the time to do so. (This window will not be open forever and estate taxes will rise over the long term).
3.Update Estate Documents
In the present, ensure your estate documents reflect your and your family’s current wishes. Periodic updates are essential. Make sure your POA, Wills, and Trusts are still accurate and represent your wishes.
4.Tax-Loss Harvesting
Tax-loss harvesting is one of the most effective ways to enhance your portfolio’s after-tax performance. Regularly review your investment cost basis and take losses where possible to offset future gains. We encourage this activity all year long and not just in December.
Lastly,thank you for trusting us as your financial planning and investment partner. We deeply value your trust and confidence. As always, please don’t hesitate to reach out if you or your family need any assistance.
Ed, Frank, & Tammy
Edward Stiles, Frank Vance
200 N Union St.
Kennett Square, PA 19348
cell 610-745-1931
Securities and Advisory Services offered through Commonwealth Financial Network®, member FINRA/ SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network
All indices are unmanaged, do not incur fees, charges, or expenses, and investors cannot invest directly into an index. Past performance does not indicate or guarantee future results. All references to markets, equities, bonds, interest rates, or any other security is notional and for illustrative and educational purposes only. This material is for educational purposes only and is intended solely for clients of Retirement Capital Advisors only. It is NOT investment advice, a solicitation or invitation or recommendation to buy or sell any security or investment product. Please contact your own financial advisor for your specific investment situation.