JPMorgan

On Saturday, February 1st the White House announced the imposition of heavy tariffs on goods exported from Mexico, Canada and China, and all three nations announced their intention to retaliate. These tariffs threaten to raise prices and slow economic activity across all four countries.

The increasing divergence in global growth has led to a greater disparity in central bank policies worldwide. As a result, the gap between U.S. 10-year bond yields and those of its key trading partners has widened to its highest level since 1994.

All told, 2024 was a year that defied expectations - sometimes for the better, sometimes for the worse - underscoring the importance of maintaining a well-diversified portfolio.

It's important to recognize that while the indicator has an impressive track record, no single economic metric is infallible.

There is a renewed sense of optimism among small and midsize business leaders as they consider their business and economic prospects for the year ahead, according to JPMorganChase’s 2025 Business Leaders Outlook survey released today. Compared to a year ago, confidence in the national economy has jumped 12 percentage points to 55% among small business owners, and more than doubled from 31% to 65% among midsize business leaders. This upbeat attitude extends to their own companies, with three-quarters of respondents expressing a positive outlook for the next 12 months.

This article focuses on the U.S. economy in 2024. The economic growth is in good shape, with multiple sectors driving it forward while there are also dragging factors. The labor market rebounded in November after experiencing fluctuations earlier. Profits grew in the third quarter, with different performances among industries, and some industries are expected to benefit from lower interest rates in the future. Inflation has shown signs of both stagnation and a positive trend. The Federal Reserve cut interest rates at the end of the year, but its stance was rather hawkish. Meanwhile, risks such as geopolitical tensions and economic slowdown are pointed out, and investment trends in fixed income, the stock market, and international markets are also presented.

In 2025, as tariffs fluctuate in the headlines, market opportunities may arise when tariff implementation and consequences are mispriced.

Real GDP growth projections were upgraded to 2.5% this year, 2.1% in 2025, and reaches trend growth of 2% by the fourth quarter of 2026.

Higher potential growth would justify a shallower easing cycle, as a more prosperous economy might sustain both higher interest rates and wage growth, without sparking inflation.