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RISING PRICES / INFLATION:
In the most recent inflation report, prices moved from a 2.7% increase in November to a 2.9% increase in December, driven higher by rising grocery costs. Gasoline prices are also up 4.4% from a month ago, and housing is up 4.6% from this time last year – which brought up the average, and gives us the 2.9% increase that we saw for headline CPI.
Thanksfully, CORE inflation finally decreased from 3.3% in November, to 3.2% in December – giving some hope that inflation is starting to make some progress.
POTENTIAL TRUMP TAX CUTS AND TARIFFS:
These are proposed changes that may or may not go into effect:
Making 2017 tax cuts permanent – Top tax bracket stays at 37%.
Corporate tax cut – Dropping from 20% to 15%, boosting business incentives.
Import tariffs – 20% on all imports, 60% on Chinese imports, with major economic implications.
Overtime pay & tips tax-free – A big win for workers, but potential loopholes exist.
No more Social Security income tax – Great for retirees, but concerns about sustainability.
Estate tax cuts made permanent – $28M exclusion for married couples.
SALT cap changes – Higher deductions for state and local taxes.
Ending clean energy tax credits – No more EV incentives.
DISCLAIMER: Realistically, not everything is going to pass. Even more realistically, we’ll probably wind up seeing a watered-down version by the time some of this goes into effect.
STOCK MARKET PRICING:
The stock market had an incredible run in 2023 and 2024, with the S&P 500 gaining 26% and 23%, respectively. However, most of these gains came from just seven major companies—Google, Apple, Amazon, Meta, Microsoft, Nvidia, and Tesla—raising concerns about market concentration similar to the Dotcom era. Despite this, analysts remain optimistic, with Goldman Sachs and others predicting a 10-20% increase in 2025, driven by potential corporate tax cuts and continued tech and AI growth.
While some worry that tariffs could slow the economy, history suggests that after two consecutive strong years, the market tends to rise again about 70% of the time. Of course, experts were completely off in their 2024 predictions, so take forecasts with a grain of salt. DeepSeek also threatens to halt chip demand, and this could lead to a reduction of spending going forward.
HOUSING MARKET:
Home prices climbed 3.4% in 2024, with the strongest gains in Miami and Chicago, while markets like Wyoming and Hawaii saw declines. Looking ahead to 2025, analysts expect more of the same; CoreLogic predicts a 3.8% increase, while Zillow forecasts a 2.6% rise, alongside higher inventory. Smaller homes may see more demand, and rents are expected to rise as new multi-family construction slows.
Long-term, experts believe housing prices will continue growing just above inflation, largely due to ongoing inventory shortages and stagnant homebuilding since the 2008 crisis. Unless a major recession forces the Fed to lower rates, affordability isn’t likely to improve anytime soon. So, while more homes may hit the market, don’t expect prices to drop significantly…real estate will remain a tough game for buyers in the years ahead.
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