Wild Ride: Wealth managers see a volatile – but healthy – year for investors
March 2025
Investors have been smiling over the past couple of years as stock prices boomed. But will stocks continue their meteoric rise this year?
Standard and Poor's 500, an index of the 500 largest U.S. publicly traded corporations, jumped 23.8% last year after a 24.2% hike in 2023. It was the first time since 1997 and 1998 that the index has recorded two back-to-back years of returns above 20%, according to FactSet, a Connecticut-based financial data firm.
“(2024) was a really great year,” said Eric Braund, founder of Black Walnut Wealth Management in Traverse City.
He and other local wealth management executives mostly say they expect the good times to continue for investors, probably at a slower pace than in the past two years. But they caution there is likely to be more market volatility this year.
“We always love it when we can throw a dart at any stock on the board and make 20%,” said Marc Hudson, president of Hudson Wealth Management in Traverse City. “But there’s a good chance we could see a dip from where (the market) has been.”
A FactSet review of analysts’ forecasts in December predicted the S&P 500 to end this year up 14.8%.
Local investment advisors say uncertainty over where interest rates and inflation are heading, a new administration in Washington that is announcing major policy changes almost daily and geopolitical upheavals make it difficult to predict investment returns this year.
“My proverbial crystal ball is in the shop, so stay tuned,” said Trevis Gillow, senior vice president of investments at Gillow Wealth Management of Raymond James.
Inflation has fallen significantly from 9.2% in June 2022, the highest rate in more than 40 years, to 2.9% last December.
But after cutting interest rates three straight times last year, the Federal Reserve paused rate cuts in January over signs that inflation’s decline has stalled. So far, the markets haven’t reacted negatively to the Fed’s pause, but that could change if expected rate cuts later this year don’t materialize.
Investment advisors say a change in political party control in Washington usually has little impact on long-term investment returns. But President Donald Trump’s election and his vow to radically remake the federal government have some investors on edge.
Holly Gallagher, president of Horizon Financial in Traverse City, says her firm has been fielding concerns from a few clients worried about the election of Trump. The president, among other things, has threatened widespread tariffs that most economists say would be bad for the economy and taken other actions that have been alternately praised and condemned by experts and voters.
One distraught client said she was moving out of the country and, against Gallagher’s advice, sold off her entire investment portfolio, triggering a large tax bill.
“The emotions out there are real,” Gallagher said. “You just try to be a good advisor.”
Local advisors say there are also many who support Trump’s policies, which include slashing federal spending, enacting tariffs on countries the president sees as taking advantage of the U.S. and cutting taxes.
“It’s nothing out of the ordinary,” Braund said. “We have clients on both sides of the aisle.”
An analysis Braund wrote last September found the S&P 500 index since 1933 performed about the same throughout Republican and Democratic administrations.
“We focus on the long-term in building an investment portfolio,” Braund said. “Our clients are planning for five, 10, 15, 20 years out. Short-term fluctuations in the market don’t make much of a difference.”
Braund and other wealth managers say their clients are mostly well-heeled retirees and those planning for retirement.
A president’s control over the economy is limited by Congress and by monetary policy, which is determined by the Federal Reserve. And the impact of a president’s economic policies might not be felt until after leaving office, Braund says.
Nevertheless, advisors are trying to assess the impact of Trump’s election and other factors on their clients’ investment portfolios.
Gallagher says she thinks the high-flying stock market could stall out and fall by as much as 20% this year.
“There’s usually a correction of 20% or more in the market every five years,” she said. “We’re due for a correction.”
Autumn Soltysiak, a partner at hemming& Wealth Management in Traverse City said she thinks corporate profits will be more widely spread this year, buoying the markets.
“We’re seeing more of an expansion of earnings across corporations,” she said. “Last year corporate profits were concentrated in the top seven to 10 companies. We think profits will be more broad-based this year.”
But she said she’s not expecting inflation and interest rates to fall much, potentially offsetting some of the positive impacts of expected broad-based corporate profits and strong consumer spending.
“There will be more chaos, but we’re not expecting dramatic change,” she said.
The Trump administration also is expected to trim regulations in the financial sector, which could reduce compliance costs for corporations and boost their stock prices, Hudson said. But he and others say a strong regulatory framework is crucial to protect investors.
“Regulation is important to keep the bad actors out,” Soltysiak said. “We don’t need another Enron.”
Enron was a large, Texas-based energy company that collapsed under the weight of a massive accounting fraud in 2001 and filed what was then the largest bankruptcy in U.S. history.
In what is likely to be a chaotic year politically filled with economic uncertainty, financial advisors say it’s important for investors to do one thing: Stick with the plan.
“We test for a (market) correction to make sure our clients are in good shape. But the financial plan is the bible we stick with,” Gallagher said.
Making short-term decisions and trying to time the market usually are bad ideas in building long-term wealth, advisors say. But it is important to periodically “rebalance” portfolios to adjust asset mixes as life circumstances and investment goals change, they say.
“Ultimately, we are seeking a portfolio that fits like Cinderella’s glass slipper,” Gillow said.
Ups and Downs? Volatility and chaos could rule this year
• The S&P 500 index returned back-to-back gains of at least 20% in 2023 and 2024 for the first time since 1997 and 1998.
• A survey of analysts’ forecasts predict the index will rise 14.8% this year.
• Uncertainty over inflation, interest rates and economic policies in a new administration have clouded local financial advisors’ crystal balls.
• Wealth managers say it will be critical this year to stick to basic financial plans but rebalance asset classes in portfolios when needed.
