Welcome to 2025. As we embark on a new year, the economic narrative that dominated much of the past two years—whether the Federal Reserve could engineer a “soft landing”—appears to have reached a favorable resolution. The economy has slowed from its post-pandemic surge without tipping into recession, and inflation has moderated substantially from its 2022 peaks.
The Soft Landing Achieved
For much of 2023 and 2024, economists debated whether the Federal Reserve’s aggressive rate hikes would inevitably trigger a recession. History suggested that bringing inflation under control typically required economic pain—rising unemployment, declining corporate profits, and falling asset prices.
Instead, we’ve witnessed something approaching the elusive soft landing. Unemployment remains near historic lows, consumer spending has proven resilient, and corporate earnings have held up better than feared. While certain sectors—notably commercial real estate and regional banking—have experienced stress, the broader economy has navigated the tightening cycle remarkably well.
What Made This Cycle Different
Several factors contributed to this outcome:
Labor market dynamics. The post-pandemic labor shortage meant companies were reluctant to lay off workers even as growth slowed, maintaining employment and consumer confidence.
Household balance sheets. Many households entered this period with stronger financial positions, having paid down debt and accumulated savings during the pandemic. This cushion supported spending even as rates rose.
Supply chain normalization. Much of the initial inflation surge stemmed from supply disruptions rather than overheating demand. As supply chains healed, prices naturally moderated without requiring demand destruction.
The Road Ahead
While we celebrate the soft landing achievement, challenges remain. The federal deficit continues to expand, raising questions about long-term fiscal sustainability. Geopolitical tensions persist across multiple regions. And the full effects of higher interest rates may still be working through the system.
For investors, this environment suggests maintaining balanced exposure while remaining attentive to valuation. The favorable landing doesn’t guarantee smooth skies ahead—but it does provide a solid foundation from which to pursue long-term objectives.
We look forward to navigating 2025 alongside you and remain committed to helping you achieve your financial goals.
