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The Year That Was…The Year That Is

Last year, most of the pundits got it wrong by predicting that the economy would finally fall apart, and the market would tank. We got it partially wrong in that following the strong return of 2023, we suggested that high single-digit growth would be about all we could expect. However, we rarely see the market return lofty double digit returns three years in a row – the last time being in the late 1990s.

After trying to convince the public that the economy and market would implode under the weight of rising interest rates, the bears are hopeful to finally be “right.” Even when the Fed started lowering rates, the bears “knew” they would finally be right. Last year, the S&P 500 Growth (up about 36% in 2024) outperformed the S&P Value (up about 13% in 2024). During the 4th quarter of 2024, the value side outperformed the growth side, and we see that continuing in 2025.  As one great philosopher once said, “nothing grows to the sky forever.”

Get Ready for Trump 2.0

In just a few days, President-elect Trump will once again become our 47th president.  After his inauguration, he will likely sign many presidential executive orders reversing the Biden administration’s agenda for the last four years. Some of the executive orders will be legally challenged in our judicial system, while others may take time for the government to institute.

Some of the new administration’s top priorities will be taxes, the border, and tariffs. While the Republicans have a very slim majority in the House and a not much bigger one in the Senate, there will be a lot of people to make happy with their different agendas. First, no politician wants to be caught saying they raised taxes, so we expect the tax part of the legislation to be a smaller uphill climb than the other two. Every politician says they want to cut spending and waste so long as it doesn’t negatively impact their district. Thus, the deficit hawks will fight a losing war but maybe win a few battles along the way.

Tackling the border and immigration issues will be very complicated and controversial.  Not one politician favors illegal immigration but even within the Republican party, there exists large differences of opinion. When it comes to the border, we refer to that famous line from the Jerry Maguire movie…“show me the money!” Where is the money going to come from?

Trump wants to use the money generated from tariffs to offset the tax bill, but it can’t also pay for more of the wall. To overcome fighting each of these battles independently, Trump has called for a comprehensive bill to cover all three at the same time. Given the disparate agendas in Congress at both a global and individual level, this will be a steep climb and ight take more than the first 100 days to develop.

You will need to keep your financial cool, as pundits from everywhere will be telling you what to do or not. Our advice…shut out the noise and stay the course until the legislation is passed, at which point minor adjustments can be made if necessary

The Road to a Perfect 850 Credit Score

Achieving a perfect credit score is a financial milestone that many aspire to, but few attain (about 1.54%). While a perfect 850 FICO score isn’t necessary for most financial goals, striving for it can lead to significant benefits and financial opportunities like lower interest rates on loans, higher credit limits, and better loan approval chances. We’ll take a couple of minutes to explain the factors that affect your credit score and how to improve your score over time.

Your credit score is primarily influenced by five key factors: Payment History (35% of your score), Credit Utilization (30%), Length of Credit History (15%), Credit Mix (10%), and New Credit (10%).

Pay on Time – The most crucial factor in improving your credit score is a flawless payment history. Set up automatic payments or reminders to ensure you never miss a due date.

Keep Credit Utilization Low – Aim to use less than 10% of your available credit. This demonstrates responsible credit management and can significantly boost your score. We suggest that you request a credit increase from your credit card company about once a year if your income has increased, your credit score has improved, or you’ve reduced your debt.

Maintain Long-Standing Accounts – The average age of your credit accounts matters. Keep your oldest accounts open and active, even if you don’t use them frequently.

Diversify Your Credit Mix – Having a variety of credit types, such as credit cards, installment loans, and mortgages, can positively impact your score. However, you should only open accounts that you need.

Limit New Credit Applications – Each hard inquiry can temporarily lower your score. Apply for new credit strategically. Research the different credit card companies and the benefits they provide.

 Building a perfect credit score is a marathon, not a sprint. While pursuing a perfect score, focus on maintaining excellent financial habits. These practices will not only improve your credit but also contribute to your overall financial well-being.

His Quest for a Perfect 850 Credit Score Left Him with More Questions Than Answers – WSJ

Sector Spotlight Series: Communication Services

In this ProVise Perspective$, the Sector Spotlight Series covers the communication services sector. From telecommunication and the internet to media and streaming, the communication services sector includes a wide variety of companies. These companies may offer financial stability, while others exhibit high growth potential. This sector is unique because it has recently evolved from the 2018 telecommunication services sector to now include stocks offering dual exposure to communication services and technology.

Companies with subscription-based products in this sector often receive steady cash flows, generating recurring revenues that contribute to their stability. Major players like Netflix (NFLX) and Verizon (VZ) have cultivated large subscriber bases, ultimately allowing them to maintain profitability and expand their service offerings. Their ability to build long-term relationships with customers gives them a competitive edge, allowing them to reduce the average cost per subscriber.

Other companies within the sector take a more innovative approach and have a high potential for growth. Meta (META) and Alphabet (GOOGL), Google’s parent company, make up more than 30% of the sector and have connected people in unique ways, bringing users across the globe together. From instant messaging to virtual reality, these companies are revolutionizing the way we communicate with each other. By incorporating communication services stocks into a portfolio, you create a mix of financial stability as well as a front row seat to innovations. If you want to expand your knowledge of the different stock market sectors, keep an eye out next month for the Sector Spotlight on energy.

Cost of Los Angeles Fires

The devastation of the Los Angeles fires is hard to comprehend at so many levels, it will be months, if not years, before all of it is fully understood. How did they start? Why were Los Angeles and California not better prepared? No water? Inexcusable! Everyone is pointing fingers while the fires continue to burn virtually unabated. Both Eaton and Palisades fires have destroyed over 12,000 structures each and no one knows where the count will end.

By some accounts the insurance losses could reach $150 billion. This number doesn’t include the cost of rebuilding the region’s infrastructure. In the short term, the fires will significantly reduce California’s GDP and will also have an impact on it at the national level. The fires will cause many jobs to be lost which will temper job creation and raise unemployment. Much like the hurricanes that ravaged Florida, Georgia and North Carolina last year, the area will begin to rebuild and find economic opportunities among the ashes. We are keeping all of those affected in our thoughts and prayers. Nothing brings America together like an event of this nature.

Episode 4: Up Your Assets™

What do health and healthcare have to do with financial planning? Everything. What is good financial success without good health to enjoy it? Listen to Ray Ferrara, CFP®, our Founder and Executive Chair, interview Carolyn McClanahan, MD, CFP® the Founder of Life Planning Partner, Inc. Carolyn is a physician who had a mid-life change in her profession and became a financial planner. She is a well sought out speaker and often quoted in the press because she speaks in an easily understood language about wealth and health. Listen now at:

 

Proudly and successfully serving our clients for over 38 years. As always, we encourage you to call or email us if you would like to discuss anything.

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