Buckle up, investors; it’s going to be a bumpy ride.
As U.S. markets hit record highs and inflation data sends mixed signals, investors are navigating an increasingly complex economic landscape heading into the second Trump administration.
University of Virginia alumna Kate Moore, head of thematic strategy at BlackRock, the world’s largest asset manager, with $11.5 trillion in assets, warns markets are likely to see ups and downs in early 2025 rather than continuing their steady rise.
“We can expect big changes in both the economy and the markets,” said Moore, the featured speaker at the Nov. 14 UVA Investing Conference on the Darden School of Business Grounds, hosted by the Richard A. Mayo Center for Asset Management.
“I’m going to be watching very closely how companies think about capital expenditure given the new administration,” she said. “Most companies don’t know what to expect, so I would expect a slower pace of spend and investment in the first part of 2025.”
Companies Holding Back
On the campaign trail, President-elect Donald Trump promised to slash taxes and government regulations, slap tariffs on imports, freeze climate-related regulations and order the largest deportation of immigrants in American history. Now, investors are waiting to see whether he follows through, especially after Republicans clinched full control of Congress.
Companies typically show predictable behavior during presidential election years, pausing major investments and hiring in the latter half of the year while awaiting election results. Once a new president’s first year begins and companies understand the new administration’s policies and regulations, they usually resume spending and hiring.
But this pattern may not hold in the current cycle, as many companies are waiting to see what happens on several fronts before they make decisions, Moore said.
“That means we’re up for a more volatile growth environment in the first part of the year, but it may be an interesting trading and investing environment,” she added.
Economic Reality vs. Voter Perception
In the run-up to the election, there was a lot of focus on inflation. Exit polls showed voters were deeply concerned about America’s economy, but there’s a mismatch between perception and reality.
“I happen to agree very much with (Jerome H. Powell, the chair of the Federal Reserve) that the economy is in very good shape right now, despite how some people feel and how that may have been expressed at the polls,” she said. “There’s plenty of data across income cohorts suggesting that not only have wages been strong, but all segments of the consumer are spending.”
University of Virginia alumna Kate Moore, head of thematic strategy at BlackRock, the world’s largest asset manager, says many companies and investors are waiting to see what happens to the economy before making decisions. (Photo by Jack Looney)
But she cautions investors, the year ahead won’t be smooth sailing. “I think we’re in for some volatility in the near part of the early part of 2025, and some great, interesting trading opportunities. But I don’t think we should assume it’s a straight line from here.”
Looking ahead, Moore emphasized the importance of identifying “policy insensitive trades” – investments that can perform well regardless of the political environment. This strategic approach reflects the complex relationship between policy uncertainty and market dynamics that investors will need to navigate in 2025.
Looking over the next five to 10 years, Moore is very bullish on U.S. large-cap stocks, even though they are trading at 22 times forward earnings.
“I have a mantra: ‘Do not bet against U.S. corporate resiliency in any environment, whether it’s regulatory changes, tariffs, labor market shifts,’” she said. “We’ve seen U.S. companies adapt consistently over the last few decades, and they manage to the bottom line. Invest where earnings are. U.S. companies are in the best position to put up earnings.”
AI: Data Ownership Will Separate Winners From Losers
Artificial intelligence has been a big investing theme ever since ChatGPT launched in late 2023 as a free service, dazzling the world with its ability to answer questions and create original materials.
Not surprisingly, Moore is bullish on AI’s potential.
