KeyBank Shares Economic Outlook for 2025

On Wednesday the Business Council of Westchester’s KeyBank Speaker Series welcomed Brian Pietrangelo, Managing Director of Investment Strategy at Key Wealth, to hear his economic outlook for 2025.

He highlighted the ongoing challenges and opportunities within the U.S. economy, emphasizing the interplay of inflation, interest rates, and consumer behavior.

Pietrangelo began by revisiting key economic trends of 2024, including the Federal Reserve’s cautious approach to interest rate cuts, which totaled three during the year. He noted that inflation, although declining from its 2022 peak, remained above the Fed’s 2% target, driven primarily by persistent price increases in services, especially shelter. This trend, he argued, complicates efforts to stabilize inflation and interest rates.

Growth in 2024 exceeded expectations, with GDP expanding at a steady pace, largely supported by robust consumer spending. While consumer activity remained resilient, Pietrangelo warned of potential slowdowns as household savings dwindle and credit card debt surpasses $1 trillion. However, wage growth, adjusted for inflation, continued to bolster spending capacity.

Regarding interest rates, Pietrangelo discussed the Federal Reserve’s delicate balancing act. The Fed’s decision to initiate rate cuts in late 2024 reflected progress in controlling inflation but left uncertainty about future policy shifts. Inflationary pressures or unexpected economic shocks in early 2025 could prompt the Fed to reverse course.

Pietrangelo also analyzed labor market dynamics, highlighting strong but moderating wage growth and employment trends. Although job openings and new hires slowed compared to post-pandemic peaks, unemployment remained historically low at 4.1%, a level he flagged as a potential recession indicator given historical precedent.

On market performance, Pietrangelo underscored the dominance of the “Magnificent Seven” technology stocks, which accounted for most of the S&P 500’s gains in 2023 and 2024. He stressed the importance of selectivity in equity investments, favoring dividend-paying stocks as valuations remain elevated.

Looking ahead, Pietrangelo identified five critical questions for 2025, including the impact of the presidential administration, national debt sustainability, and the trajectory of U.S. equities. He forecasted modestly higher growth and inflation under the new administration’s policies, which emphasize deregulation and tax cuts.

Pietrangelo concluded with advice for investors: maintain a long-term perspective, resist reacting to political developments, and prioritize diversification. Despite uncertainties, he expressed optimism about the U.S. economy’s ability to navigate challenges and sustain growth.

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