As we enter 2025 with a fresh start, it's an opportune time to reassess and fine-tune our financial portfolios. While there are factors we can control, there are also broader economic forces at play that we must monitor carefully.
Managing your portfolio starts with focusing on elements within your control:
These fundamental strategies are essential to building a resilient portfolio in 2025.
Beyond your personal financial strategies, there are economic factors shaping the market landscape that warrant your attention:
The scale of U.S. government spending is staggering. In the late 1700s, federal spending was nonexistent. By 2008, it had reached $3 trillion annually, a growth that took nearly 200 years. However, from 2008 to today, spending has skyrocketed to over $7 trillion annually in just 16 years—an additional $4 trillion in less than two decades.
This rapid spending growth poses risks to the economy. To put it into perspective: if you had $100 in your wallet today, $60 of those dollars were printed and circulated in just the last 16 years, while the remaining $40 were issued over the previous 220 years. This demonstrates the principles of Keynesian economics, where spending is used as a tool to stimulate prosperity. While this approach can deliver short-term benefits, it often comes with long-term consequences, like inflation and economic instability.
For the past two years, government job creation has outpaced the private sector by nearly 1%. While this may seem minor, it highlights a growing reliance on government-driven employment, which can strain resources. The previous Trump administration had plans to significantly cut government spending and reduce government jobs. However, implementing such changes could trigger a long-overdue recession, especially if healthcare and other key sectors are affected.
Economic metrics such as slower earnings growth, the Dow Jones Price-to-Earnings (P/E) ratio, and stock yields will be important indicators to monitor this year. While these may signal caution, they also highlight the need for strategic investment planning.
Despite some challenges, there are several positive indicators that suggest the market is stable and resilient:
To position yourself for success in 2025, consider the following strategies:
The financial landscape for 2025 presents both challenges and opportunities. While factors like government spending and economic metrics remain outside our control, focusing on sound investment principles—diversification, asset allocation, and risk management—can help ensure a resilient portfolio. Stay diversified, remain prepared, and monitor the broader economic environment closely. With the right approach, you can navigate 2025 confidently and position yourself for financial success.
We're here to help. For guidance, contact us today.
Michael Embrescia is a financial advisor located at EmVision Capital Advisors, 251 W. Garfield Rd. Suite 155 Aurora, OH 44202. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (330) 954-3770 or at info@emvisioncapital.com.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Advisor. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network®.