Are You Ready For Deregulation? | Stewardship Concepts Financial Advisors

Happy New Year!

Happy Friday and New Year, everyone! Today's blog is a piece of our quarterly commentary sent to our clients. We will briefly cover our firm updates and discuss our market predictions for this year, which hinge on inflation, deregulation, and interest rates.

Our team is so thankful for our clients. Looking back on the year, we are celebrating! We've grown from $80 million to over $93 million in assets under our management and helped over 190 households steward their finances. The two main ways we've been introduced to new clients are current client recommendations and Google searches.

2025

Looking to next year, our team will continue to do what we enjoy—helping more people.

Wyn is reducing his office hours to two days a week in 2025, looking to spend more time with family and on vacations with his wife, Kerry.

Kate is an incredible and essential asset to our team, empowering us to help more people. Kate is finishing up school this summer for accounting and is looking to increase her hours in the office in the second half of this year.

Amy is looking forward to her youngest daughter, Lyla, starting preschool in the fall and her family vacation to Kauai in May.

My wife Jenny and I (Noah) are excited about our first baby, which is due May 10th. I'll still be available around that time, but it may only be by Zoom for a few weeks. If I have bags under my eyes, you'll know why.

Our team is excited about the year ahead as we strive to help more people, remain open to learning, and deliver exceptional service to our clients.

Returns- still hanging in there!

This 4th quarter's performance was flat for stocks and poor for bonds. There was no Santa Clause rally at the end of the year for stocks, wiping out much of the first half of the quarter's gain. Bonds were hit due to the drastic change in the Fed's tune toward 2025 rate cuts. The market initially predicted four 0.25% rate cuts for 2025, so it surprised the market when that changed to two 0.25% cuts. Rates that had been preemptively lower shot back up, lowering bonds.

It's been a massive surprise for anyone predicting the stock market this year. The S&P 500 was mainly moved entirely by a few large tech companies fueled by the hopes of AI. Many other stock indexes returned in the 9-15% range for the year. It will be curious to see how the S&P 500 fares in 2025.

Deregulation, tariffs, and inflation

The million-dollar question we'd love to get answered is what will happen in the first year of the new presidency. We have some ideas and thoughts.

Deregulation benefits markets by lowering costs and making businesses more competitive. Overregulation in home building has adverse effects, as evidenced by the excess time and money it takes to build a house—one of the factors leading to our housing crisis. The downside is that if regulations become too loose, they could hurt consumers through poor or dangerous quality of products.

The Trump administration wants to cut spending by up to $2 trillion. Most likely, the actual amount will be much less. We see this as a positive element in the long term, but it causes short-term economic pain. Cutting spending results in people losing jobs and, as a result, their income. The U.S. is a consumer economy, and with less discretionary spending, we could see a pullback in our economy like an economic hangover. However, cuts could be positive in the long term because a more efficient government will take less money to run leaving more for businesses to reinvest in our economy.

Tariffs are another huge piece of Trump's agenda for the next four years. The goal is to bring back the competitiveness of American manufacturing and raise revenue to pay off our debt. The biggest worry is inflation. Trump's last round of tariffs didn't result in inflation. But that might not be the best example because that round of tariffs was before COVID. It's much easier to re-ignite inflation once it's already spiked.

Market prediction

We may not have escaped the effects of shutting down our economy in 2020. When that happened, it was a massive sign of a recession. But there was none. The mountain of stimulus money was a shot of morphine, and we've been addicted to government spending ever since. We must pay the price, but only time will tell when. A positive aspect of our economy is that the average U.S. worker has become more efficient with AI integration, creating a win-win scenario that boosts productivity and drives profitability. Will this be enough to avoid a recession?

What concerns us as investment managers is the valuation of where the stock market is relative to its profits historically. It's very expensive, and it continues to climb. The market is impossible to time and can have long periods of overvaluation, so we continue to be invested—cautiously diversifying and hedging, especially in U.S. large-cap growth.

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