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Happy New Year 2025

By Gary Webb, RFC

I hope you had a wonderful holiday season with family and friends. I begin with gratitude that 2024 was another good year for the stock market and for investment accounts. We hope 2025 will be even better.

Did you know that our founding fathers did not include income tax as part of the original framework of the United States? In 1909, progressives in Congress attached a provision for income tax to a tariff bill. Hoping to kill the idea for good, conservatives proposed a permanent income tax as a constitutional amendment because they did not believe it would ever be ratified by the States. Much to their surprise, the 16th Amendment was approved in 1913 establishing Congress’ right to impose a federal income tax.

Clearly the tax code has changed dramatically over the years, and it will continue to do so. At the start in 1913, the top tax rate was 7%. Between 1913 and 2024, it was as high as 95% in 1944 and as low as 25% in the 1920s. Today it is 37% which is historically considered a low tax rate.

We enjoyed a very strong 2024 stock market with the S&P500, Dow & Nasdaq indexes all hitting new highs - especially in late November and December 2024. Regardless of the headlines that came our way for the last eight quarters (inflation, high interest rates, government shutdowns, etc.), the broader equity indexes continued to climb.

Expectations for lower rates combined with declining inflation remain front and center, tying the rate cut to a need to stimulate the labor markets as opposed to being a response to a struggling economy.

There was some market volatility last September, but that pessimism was short-lived. The Fed cut rates by 50 basis points, and the worries faded in the eyes of major stock indexes again. Could rate cuts result in a pickup in inflation that most feel is in the rear-view mirror? It’s possible. We will see if the Fed can thread this narrow needle to combat the effects of inflation on the economy.

If headlines dictated economic performance, long-term investors wouldn’t be in the position they are in today given the market news over the last couple of years!

As you refine your goals for 2025, plan well for a successful & joy-filled year and keep in mind:

“A man who dares to waste one hour of time has

not discovered the value of life.”
~Charles Darwin

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