This past weekend, I took my nine-year-old son with me for a round of golf. One of his favorite parts of the experience is getting the chance to drive the golf cart. As I guided him through the process, I quickly realized that the hardest lesson to teach wasn’t steering or braking—it was how to control the throttle, knowing when to apply just the right amount of pressure to keep things smooth and steady.
This got me thinking about how this challenge mirrors the way our economy functions. Much like a golf cart navigating the course, the economy is constantly adjusting to changing conditions. While long-term growth is achievable, it’s rarely a straight path. Structural, financial, and external factors create an uneven ride, requiring careful balance between acceleration and controlled slowdowns to maintain stability. Just as a skilled driver learns to regulate speed, sustainable economic growth depends on knowing when to push forward and when to ease off the gas
As we head into spring, the U.S. economy is beginning to ease off the gas a bit. After a strong rebound from the pandemic and a period of steady expansion fueled by resilient consumer spending, economic growth now appears to be slowing back toward its pre-pandemic norm of around 2%. Consumer confidence surveys suggest some pullback in spending, and the job market seems to be tightening. However, overall, consumers—especially higher-income earners—are still in good financial shape. In fact, the top 10% of earners now account for roughly half of all spending.
This gradual slowdown could actually be a positive for the stock market. With growth easing, inflationary pressures may subside, increasing the likelihood of more interest rate cuts from the Federal Reserve. It’s important to note that this is a moderation, not an economic collapse. In fact, despite some weaker economic data last month, inflation flaring back up is likely a greater concern than a recession. A controlled slowdown from last year’s unsustainable 3% growth rate is a scenario we’re willing to embrace.
Slower growth and lower inflation would support the Fed’s plan for rate cuts, preventing a sharp rise in interest rates that could negatively impact both stocks and bonds. So far this year, bond yields have declined but remain attractive, making 2025 look promising for fixed-income investors. Meanwhile, stocks have had a sluggish start due to concerns over tariffs, but a combination of moderating inflation and stable interest rates creates a strong case for continued gains in the market.
A key driver for stocks this year is corporate earnings, which remain solid. In the fourth quarter, S&P 500 companies posted earnings per share growth of more than 18% compared to the previous year. While some analysts’ projections for double-digit earnings growth in 2025 might be overly optimistic—especially if tariffs persist and trigger retaliatory measures—the earnings outlook remains strong enough to support stock market gains.
Market leadership is also shifting. The biggest seven technology stocks, often referred to as the “Magnificent Seven,” have dropped about 9% this year, while the broader S&P 500 has seen slight gains. As skepticism grows over the long-term momentum of the artificial intelligence (AI) boom in big tech, investors are rotating into other sectors—a natural evolution as a bull market matures.
In the near term, tariffs remain a risk. Some may be adjusted, delayed, or even reversed, but others will likely remain in place. If trading partners retaliate, it could weigh on U.S. economic growth. Certain industries, such as autos, food and beverage, and retail, may feel the impact as price increases and currency fluctuations limit how much foreign suppliers can absorb. This could complicate the Fed’s task of managing inflation. However, even with these challenges, corporate America’s AI-driven earnings growth is unlikely to be derailed.
Overall, stocks are expected to have a positive year, supported by continued corporate profit growth. However, the road ahead—much like on a golf course—may be bumpy as the economy slows and uncertainty around policy decisions persists.
Have a blessed week!
Joe Shearrer, CPFA® is Vice President and Wealth Advisor at Fervent Wealth Management.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged and may not be invested directly.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.
