The financial markets closed out 2024 with strong returns, driven by economic resilience, a booming AI sector, and a remarkably calm credit market. But as we enter 2025, financial advisors must assess both opportunities and risks that could shape client portfolios in the months ahead.
Will the Federal Reserve maintain its stance? Can AI investment sustain its rapid growth? And how will evolving economic policies impact market stability?
Our Market Outlook 2025 report provides data-backed insights to help advisors navigate uncertainty and make informed decisions. Download your copy now for the full analysis.
2024 in Review: A Strong Market, But What’s Next?
Major indices posted impressive gains last year:
S&P 500: +25.02%
NASDAQ Composite: +29.57%
MSCI ACWI (Global Markets): +17.49%
Dow Jones Industrial Average: +14.99%
Bloomberg US Aggregate Bond Index: +1.25%
These results were supported by strong corporate earnings growth (16.9%), steady job gains (~250,000 per month), and tight credit spreads indicating a stable financial environment.
However, historical market cycles suggest that past performance does not guarantee future results, making it essential for advisors to remain proactive.
Key Market Factors for 2025
As we look ahead, these four critical factors could influence market performance:
Federal Reserve Policy & Interest Rates
The Fed has lowered rates by 100bps since September 2024 in response to slowing inflation and labor market shifts. While no further cuts are expected until mid-year, any deviation from this expectation could impact both equity and fixed-income markets.
What to Watch:
Federal Open Market Committee (FOMC) meetings for rate guidance
Inflation trends, particularly core CPI levels above 2.5%
Labor market data and consumer spending shifts
AI Investment & Market Valuations
The AI sector was a major driver of market returns in 2024, but sustaining this level of growth depends on continued corporate investment and economic conditions.
What to Watch:
Earnings reports from leading tech firms
Capital expenditure trends in AI and semiconductor industries
Potential regulatory developments impacting AI growth
Credit Markets & Economic Stability
High-yield bond spreads tightened to historic lows in late 2024 (259bps), signaling investor confidence. However, tight spreads mean less compensation for credit risk, leaving the market more vulnerable to shocks.
What to Watch:
Corporate debt levels and default rates
Economic policy shifts that could affect credit markets
Performance of emerging market bonds as global growth slows
U.S. Policy & Trade Agreements
A new presidential administration has already begun implementing campaign policies related to trade and fiscal policy, which could introduce both risks and opportunities for financial markets.
What to Watch:
Adjustments to tariffs and trade policies
Potential tax law changes impacting businesses and investors
Fiscal spending measures that may drive market volatility
How Financial Advisors Can Prepare
Assess Portfolio Diversification: Market trends may shift quickly, making it essential to evaluate exposure to equities, fixed income, and alternative investments.
Monitor Market Inflection Points: Staying informed on Federal Reserve decisions, AI investment flows, and credit conditions can help advisors adjust strategies proactively.
Prepare Clients for Potential Volatility: Discussing risk tolerance and long-term goals with clients now can prevent reactionary decision-making later.
Download the Full Market Outlook 2025 Report
For a detailed, data-driven look at 2025 market conditions, download our exclusive Market Outlook 2025 report. This guide provides insights on economic trends, risk factors, and portfolio considerations for financial advisors navigating today’s dynamic environment.
This material is for informational and educational purposes only and should not be considered a recommendation of any particular security, strategy, or investment product, nor as investment advice. It is not provided in a fiduciary capacity and may not be relied upon for investment decisions. The opinions expressed are based on current market conditions and subject to change. Forward-looking statements, estimates, and information are based on proprietary and non-proprietary research and other sources believed to be reliable but are not assured for accuracy. Past performance is not indicative of future results. No part of this material may be reproduced or referred to in any form without express written permission from Quartz Partners, LLC. Market data sourced from Quartz Partners’ Market Outlook 2025 Report, published February 20, 2025.