2025 Economic Outlook

As we begin the new year, inflation is still close to 3% instead of the 2% the Federal Reserve wants. The 10-year Treasury yield is creeping higher instead of lower despite the Federal Reserve cutting interest rates.

The economy is in the late business cycle which generally bottoms out with a recession. However, many economists believe we will avoid a recession. GDP may decline from 2.8% in 2024 to 2% in 2025.

2025 begins the year with a new Administration which will bring with it new fiscal policies.

The challenge will be where to start first. So many promises were made during the campaign:

  • Fix immigration – Control the Border
  • Increase the energy supply – Drill, baby, drill!
  • Preserve the tax laws beyond 2025.
  • Expand tax cuts for blue-collar workers.
  • Reduce the regulatory burden.

The push is to create “One Big Beautiful Bill”. Yet the ability to pass that in one fell swoop is unlikely. The Senate is leaning towards two bills. This could slow the passage of the entirety over two legislative seasons.

There is a sense of urgency to fulfill promises made. To provide economic relief to the consumers. While the legislative process takes longer to accomplish, it creates laws that establish policy.

Some changes can be made with Executive Orders. But that can result in a revolving door. One Administration implements Executive Orders, the next reverses the policies. Industries are left with uncertainty and indecision.

Executive Orders do allow for some death grips to be released and allow for economic growth. Increasing energy supply and distribution will have a ripple effect across the economy. As reduced energy costs filter through the economy, prices of goods will decline. And it will be seen and felt at the gas pump.

Trump 2.0 is giving directions to remove ten regulations for every one implemented, accelerating the process from his first administration. Regulations are costly and burdensome for businesses. They slow growth and deter business development. They are inflationary.

Tariffs are causing a big stir across industries and globally. Companies and countries are sitting up and paying attention. Some posturing is to bring concessions that should benefit the U.S. economy.

Tariffs are touted as being inflationary. Tariffs can bring a one-time increase to the price of goods. Collecting tariffs may allow for tax cuts, like “no taxes on tips”.

The dollar remains strong. This allows the U.S. to buy more goods with less money. Traveling overseas may cost less than traveling domestically.

Expect the transition in Administrations to be bumpy. And don’t expect it to smooth out any time soon. Trump is surrounding himself with disruptors. He wants to bring changes on many fronts. It won’t be business as usual.

The stock market may be volatile during these transitions. Remember you are investing for the long term. Don’t get distracted with the news headlines. Know that I am keeping an eye on the ball and adapting as needed. I see blue skies ahead.

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2025 Economic Outlook

As we begin the new year, inflation is still close to 3% instead of the 2% the Federal Reserve wants. The 10-year Treasury yield is