Year-end Economic Review Presents No Immediate Causes for Concern

Paul K. Fain, III, CFP^®

In the year-end retrospective, our stockings were stuffed with a combination of oranges, walnuts and coal. In other words, life sometimes brings us a lump of coal, but we usually can find simple blessings to be grateful for.

For instance, we avoided a much-anticipated recession and experienced a rare economic soft landing. Meanwhile, unemployment nudged higher but stayed reasonable as the economy has been surprisingly strong.

With the Federal Reserve adjusting key interest rates down, savings accounts have followed the trend. Still, a money market fund presently earning 4% is still a “hallelujah” compared to the zero rates we were getting a few years ago.

The housing market continued to present challenges for the budget-minded buyer. Mortgage rates remained stubbornly over 6%, home prices continued to rise, and inventory was low. Renting has provided little relief as rents have increased 20% in recent years.

Increases in our costs of living moderated this year, but we will not see prices return to pre-pandemic levels. The cost of groceries or purchasing a car is as much as 50% higher than five years ago. Everyone is adjusting their spending plans.

Investors have had reason to cheer. The U.S. stock market is on track for its second straight year of 20% gains! The classic diversified “balanced” strategy of 60% stocks and 40% bonds is up more than 10%.

As we look into a new year, although there are not any immediate causes for concerns, it is always prudent to prepare for periods of volatility and headwinds. Stay diversified. Be mindful of your cash reserves. Review and rebalance your investments.

And finally, while counting our blessings during the holidays, it is also important to gather ‘round the kitchen table to create a new budget for the new year! (I know, that sounds like coal, but trust me, it is an orange).

Wishing you better health, peace and joy in 2025.

This article originally appeared in the Knoxville News Sentinel online on December 27, 2024.