If you follow sports for any length of time, you will experience a fair share of disappointments. After a poor season, the excitement starts in a franchise’s front office: turnovers in coaching, player trades and draft positions can put the team on a new trajectory. Hope once again springs eternal.
Unlike a team in need of a rebuilding year, the U.S. economy did not disappoint in 2024. Economic activity was robust, job creation proceeded and inflation fell. Investors saw asset appreciation, while workers’ wage gains exceeded inflation. Momentum was strong as 2025 began; the stage is set for the nation’s winning streak to continue.
Washington is in the midst of a change in leadership. The new administration will prioritize an agenda of domestic growth and deregulation, adding to momentum. Changes to immigration and trade policies may raise risks to the goal of taming inflation. These elements reinforce our expectation of a more cautious monetary policy posture.
Following are our thoughts on recent data and developments.
KEY ECONOMIC INDICATORS

- U.S. Treasury yields have entered a new, higher range, which we expect to persist. Higher short-term yields reflect the Fed’s more cautious signaling, while long-end yields reflect greater term and risk premia for the highly indebted nation. Higher yields have brought the Treasury yield curve out of inversion after more than two years.
- Front-loaded import orders to capitalize on the current trade environment will increase the trade deficit and weigh on gross domestic product (GDP) in the fourth quarter, though inventory accumulation will be accretive to economic growth estimates. We expect the final demand components of GDP (consumption and business investment) to continue their gains despite economic noise.
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