Checking In with Ara – February 2025

Reflecting on 2024: Market Highlights, Inflation Trends, and What’s Next for 2025

As we wrap up 2024, it’s the perfect time to reflect on the year’s key financial events and what they mean for the road ahead. On a personal note, this year brought some exciting changes—I adopted a boxer puppy named Kona, took some unforgettable trips, and even moved into a new home. Now, I’m looking forward to what 2025 has in store, with hopes for more travel, good health, and financial growth for all of us.

From elections and interest rate adjustments to shifts in inflation and an impressive rally in the stock market, 2024 was packed with significant developments. Let’s dive into some of the major financial highlights.

A Strong Year for the Stock Market

The stock market delivered an impressive performance in 2024, with the S&P 500 surging approximately 23%. This exceeded most forecasts and contributed to a two-year gain of around 53%—one of the strongest stretches since the late 1990s. A key driver behind this growth was the “Magnificent 7” stocks, which climbed nearly 67%, alongside other major mega-cap stocks.

This remarkable rally served as a reminder of the importance of staying invested and maintaining a long-term perspective, even during uncertain times.

Inflation and Monetary Policy Adjustments

Inflation remained a key factor in shaping both economic policy and consumer sentiment throughout the year. Fortunately, we saw some positive trends, with inflation dropping from 3.1% in January to 2.6% by October. In response, the Federal Reserve adjusted its approach, slowing the pace of inflation while introducing interest rate cuts. By the end of 2024, interest rates had settled in the 3.5%–4% range—striking a balance between economic growth and inflation control.

For investors, these shifts in monetary policy underscored the importance of adaptability and a well-structured financial strategy.

Looking Ahead: Positioning for 2025

As we enter 2025, now is a great time to review your Bucket Strategy® and ensure it aligns with your financial goals. The strong market performance in 2024 presents an opportunity to take advantage of value averaging—capturing some of the gains while ensuring distributions from Bucket 1 remain intact, without dipping into equities in Bucket 3.

We’ll be revisiting value averaging during our next meeting in 2025. Expect to hear from Steve and Hank when it’s time for your review. In the meantime, if you have any questions, feel free to reach out.