Tech Giants, Trump, and Your Money: What Happened in 2024 (And What's Next)
Listen and Follow Heir Necessities: Apple Podcasts | Spotify | YouTube
In this episode, I'm breaking down why everyone's freaking out about the "Magnificent Seven" tech companies, what their massive gains mean for your portfolio, and why putting all your eggs in the S&P 500 basket might not be the smartest move.
Plus, I'll explain why Trump's proposed policies could shake things up in 2025 (hello, inflation!) and what that means for your long-term investment strategy.
No fancy charts, no financial jargon – just real talk about what's happening with the market and what you actually need to do about it.
Let's be honest, as a current or future inheritor, you need to know this stuff, but you shouldn't need an MBA to understand it.
🗓️ Schedule a FREE call to talk about whatever money questions are on your mind.
Transcript:
Hey, I'm Katherine and welcome to a quarterly market recap with Heir Necessities.
Hey, I'm Katherine and welcome to Heir Necessities, the podcast that is full of real talk and the financial information that Gen X, Millennial, and Gen Z inheritors need. I'm a certified financial planner and I'm the founder of Sunnybranch Wealth, which is a fee-only registered investment advisor that works exclusively with current and future inheritors. I'm coming at you today with my market recap for 2024 and my outlook for what might be coming in 2025.
Simple Market Analysis: Breaking Down Complex Financial Topics
Before you turn this off because you're not in the mood for a 20-minute presentation filled with jargon and charts, just listen. My goal at Sunnybranch is to make investment advice relatable and understandable for regular people. My goal for this market recap is literally for it to be like five to seven minutes long. If I get really spicy, I might go up to eight or nine.
If you feel like you want to be a little bit informed, but you don't want to take this huge, long, deep dive into all these specifics that you don't understand and don't actually affect your life, then this is what you need. I'm going to kick it off by talking about what happened in the stock market in 2024.
2024 Market Performance: Understanding the S&P 500's 25% Growth
The S&P 500, which is used as a broad market index, generalizing the health of the overall US market, was up over 25% in 2024. And a lot of that growth was due to easing inflationary pressures. And it was also due to this continued AI boom and this optimism and spending by big companies, especially, to build out their AI capabilities and try and capture a slice of that business and a slice of the future profitability that it's believed that AI is going to bring to companies.
The Magnificent Seven: Impact of Tech Giants on Market Growth
But it's important to know that just because the S&P 500 is up 25%, it doesn't mean that the stock market as a whole is up that much. The S&P 500 represents the 500 biggest companies in the United States. But even within that index, it's not saying that all of those companies were up 25%. What it really means if you look under the hood is that there are seven companies, they're called the Magnificent Seven. They've had different names as the companies that are driving growth have shifted, the sort of market leaders in the US.
What that return means if you look at the S&P 500 is that there are these seven companies that have insane returns. They're up like 100, 200, 300%. And then you have the rest of the regular 493 companies that may have lesser returns, they might even have a negative return, but you have this small portion of the index that is driving a huge portion of the growth, which is a really concentrated growth pattern and presents some risks in the market.
Market Risks: Concentration and Diversification in Today's Economy
Because if the factors that are driving that growth, and AI is a huge part of them and easing inflationary pressures is also a huge part of that, if those underlying market conditions change, you could see a really quick reversal of growth patterns in that group of companies, which would be a really significant hit to the overall index because that profit is not really diversified. It's all very heavily concentrated in a few companies and really in one specific industry, like in the tech industry.
It also doesn't mean that all of the other companies in the US are doing well, right? If you look at smaller companies in the US or if you look overseas at international companies, you're not going to see the same return profile necessarily in those companies as you do in the S&P 500, which is normal and is an important part of building a portfolio. You want to build a diversified portfolio. You don't want to put all your eggs in the S&P 500 basket because as I just talked about, if there is a change in those underlying economic conditions that would benefit smaller companies, but not the big ones, you want to make sure that you're owning companies across a really broad swath of the US market and also across the global market, not just in the US.
Forward-Looking Markets: How Stock Prices Reflect Future Expectations
So then switching gears, talking about, the markets did really, really well in 2024. What does that mean for 2025? The most important thing to remember about the stock market as a whole is that it is forward-looking. So the price that you can buy a share of Microsoft or NVIDIA for today, it doesn't reflect what analysts think the actual value of Microsoft or NVIDIA is today. It reflects how analysts think the company is going to do over the next several quarters and how well they are positioned for future growth.
So if NVIDIA is priced at 500, say, and then they share really disappointing quarterly earnings or there's a change in the macroeconomic conditions that those forecasts are based on, then you're going to see the share price sink. And the opposite is true, right? If a company does better than average, or if underlying macroeconomic changes are to the benefit of that company, then you'll see their share price go up.
2025 Market Outlook: Political Changes and Economic Impact
So as we start into 2025, then the question becomes, what are the core assumptions that are underpinning the current value of the most profitable companies in the US? And where are there any weaknesses in those assumptions that could cause the value of those companies to fall or to rise if their strengths instead increase?
An important thing to note here is that we have a new administration coming in. Trump has made a lot of policy claims that would significantly affect the inflationary environment in the US. Right now, inflation has proved to be more stubborn than people thought. The Federal Reserve was cutting rates in 2024, but at the end of the year, they signaled that they were going to cut rates fewer times than analysts thought moving into 2025. They still think they're going to be getting inflation under control, but it's just been a little bit more stubborn than they thought. So they want to keep rates higher longer to make sure inflation doesn't spike up again.
Policy Impact: Immigration and Tariffs' Effect on Inflation
But there are two main things that Trump has proposed that could have a huge role in inflationary pressures and an increasing inflation, which then would be a big change to the macroeconomic environment and could represent a significant shift in forward-looking assumptions and how well the stock market performs in 2025. And those two things are immigration restrictions and tariffs. Both of these things will make products and services in the US more expensive. They make domestic labor in the US more expensive, which increases costs to companies, which companies then pass on to consumers, raising inflation.
Most of the products we use are not made in the US, and even if they're assembled in the US, they're probably going to include parts made from overseas. So when you have tariffs that raise the cost of those parts, then the cost of the goods goes up, which again is an inflationary pressure.
Long-Term Investment Strategy: Focus on Sustainable Growth
So if Trump is actually as aggressive as he claims in terms of putting these tariffs and these immigration restrictions in place, it could increase inflation, which then would probably bring stock market returns down in 2025. But with all of that said, no one knows what the market is going to do this year. I make these videos every quarter, every quarter I say the same thing. This is what happened, this is what might happen. Also, nobody knows.
The most important thing, especially as a younger inheritor, someone who has or will inherit family wealth, is to focus on the long-term buy and hold perspective. If you're in your 20s, 30s, or 40s, what happens in the stock market next year or the year after really doesn't matter for you. The thing that matters is that you stay invested. You keep your savings rate as high as it can be. You keep putting money into the stock market if you're investing.
Closing Advice and Contact Information
If you get scared and you sell out, that's when things really start to hurt you. So no matter what happens, the most important thing you can do is to stay invested in line with your risk tolerance, and if you feel like you're struggling, reach out to someone who can help you.
If you're interested in learning more about me or about Sunnybranch, you can follow me on Instagram at Sunnybranch Wealth. Check out the other episodes of Heir Necessities. Check out my website at sunnybranchwealth.com. Heir Necessities Season Two is going to be starting in a few weeks here, so I will look forward to sharing that with you when it drops, and I'll hope to hear from you soon.
Let’s take the next step together
Understanding how to manage your investments in response to market changes is not easy. Inheritors can encounter a wide variety of different situations requiring knowledge and finesse to manage. If you need more help, you can reach out to Katherine Fox, CFP® and CAP®, a financial planner for inheritors to learn how Sunnybranch can help you understand your portfolio and make a plan for the future, whatever the stock market does.
