Quick shot: U.S. economic strength prompts market recalibration

Over the past few quarters, 2025 growth estimates for the U.S. economy have continued to rev up, and last week’s better-than-expected employment report confirmed the economy’s robust engine.

While stronger growth is a welcome development, it can throw a few detours our way if markets are caught off guard. That's what's been happening recently. Markets are recalibrating their GPS to steer through this stronger growth landscape, with less need for the Federal Reserve to significantly ease policy. This has led to higher yields, putting some pressure on bond prices and equity markets. Think of it like hitting a traffic jam – there's a route ahead, but it might take a bit to get moving again.

As we navigate these twists and turns, our outlook on the U.S. economy and markets remains optimistic. Despite recent bumps, we have a positive long-term view on U.S. equities, fueled by strong earnings growth. Core bonds could still offer potential resilience during economic slowdowns and actively managed, globally diversified fixed income strategies could offer additional support. Meanwhile, gold may serve as a diversifier against higher inflation and the U.S. dollar continues to be bolstered by the economy's strength.

The key to navigating this market traffic is staying invested and building diversified, resilient portfolios.

All market and economic data as of 01/14/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

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