A new year can bring many challenges and opportunities, with a new presidential administration in play.

Inflation
Inflation has been a hot topic for several years. Looking into 2025, I expect inflation to remain level as we are near the last leg of the marathon. It would appear most of the significant downward changes have already happened, and inflation will remain relatively controlled at a sustainable rate. Inflation often gets a bad reputation (especially since the 9.1% peak in mid-2022), but inflation at its most fundamental concept (around 2%) isn’t a bad thing. It represents a healthy economy as zero inflation can be indicative of a slacking economy and negative or deflation can be detrimental.

Unemployment
Unemployment tends to be another area that can be misinterpreted. Higher unemployment rates can be helpful for businesses as they directly relate to the candidate pool available to hire from. Whereas low employment ranges can end up reflecting those who may be considered “unemployable” or those choosing to forgo workforce altogether. This can cause serious issues for businesses as they struggle to find quality job candidates. Nationally, unemployment is just over 4% and North Dakota is holding steady in the high 2% range. For context, a 4%-5% unemployment range is seen as healthy but historically low.

New Administration
Moving into the new year and a new presidential administration, there will most likely be significant changes. Fortunately, we’ve seen what this administration is capable of and should be able to gauge prospective change to policy over the next four years. We know this administration tends to favor businesses, especially the small to mid-sized businesses. Trump is assembling an ambitious cabinet to determine and guide these changes, but I expect we’ll see an expanded timeline before fruition.

Talk of tariffs has been rampant after the election, but I suspect some of these concerns may be misplaced. While tariffs are likely, they are also a negotiation tactic Trump has used in the past to facilitate communication with trade partners, prime trade partners for negotiation, and protect local manufacturing. I suspect any tariffs put in place will be with the specific intention of slowing down the dumping of cheap materials like steel to protect our American consumers and manufacturers.

2025 Concerns
As we navigate 2025, I have a few areas of concern. First is the looming $36+ trillion in national debt which could become problematic for paying interest costs if rates stay high. Consumer and corporate debt are also a factor to watch as loans are repriced at higher rates and credit card debt grows.

Another concern is the housing market. Since the demand for homes is still high and supply is low, we are seeing a misalignment between home prices and interest rates for mortgage loans. The low mortgage and refinancing rates during the pandemic locked in existing homeowners and limited the supply of used homes on the market. The new home market has proved to be quite expensive for many buyers, which leaves them renting, further perpetuating the misalignments we’re seeing.

Finally, the feeling of too much euphoria. I get concerned when there are no pessimists left, it’s usually the time we get a market downturn. We have had two phenomenal years in the equity markets and investors are becoming used to the great returns. There could be some disappointment ahead as the 25%+ market returns are not sustainable without a breather in the form of a correction. Like a team winning the Superbowl in back-to-back years, it happens now and then, but the odds of a third are low.

Ultimately, we have a lot of optimism surrounding the markets and the economy for 2025. The corporate and consumer landscape is healthy, but I would still recommend people remain cautious. When making financial decisions, be sure you are having conversations with the right people in favor of goal-oriented decisions rather than reacting to the pressure of what others may be doing.

Derek Binstock is the Chief Investment Officer for Bravera Wealth where he leads portfolio management and collaborates closely with Bravera advisors. Derek is a Certified Investment Management Analyst (CIMA^®) and holds series 7 & 66 securities as well as ND insurance licenses. His approach blends fundamental and quantitative research across asset classes to achieve optimal outcomes for clients.