How 2025 could affect the economy and your money

MINNEAPOLIS — A new year brings excitement and opportunities, but when it comes to the economy, 2025 also brings uncertainty.

“It’s going to be very volatile. Things are going to go up and down and that’s why it’s so important to have that plan,” Prosperwell Financial CEO Nicole Middendorf said.

The new year will mark the beginning of President Donald Trump’s second term as President. Trump has vowed to cut taxes, decrease government spending, and increase tariffs on China, Mexico and Canada.

The Republican party also controls the House and Senate, so the party will likely have the votes to pass several economic policies that could affect American consumers.

“A lot of these things will be good things, potentially, but some things like tariffs might be painful from a short-term standpoint,” Middendorf said.

She says some of Trump’s proposed tax and economic policies could help the average American family, but she says consumers shouldn’t plan on those policies until they are passed.

“There are so many things, so many unknowns, and realistically in life you can only control what you can control. We have no idea what rules are going to change, or what laws are going to happen, and so go with what you have now,” Middendorf said.

She is encouraging her clients to take more control over their personal finances to prepare for the uncertainty in the new year.

Besides the uncertainty of a new president and a new party in power, Middendorf says there have been a concerning number of layoffs at large companies in recent months.

“I mean, we’re seeing more surprise layoffs lately and more of those layoffs could happen in the new year. Any wealth advisor is going to tell you at a minimum have three to six months of expenses set aside in liquid money,” Middendorf says.

She is also encouraging Americans to diversify their retirement accounts heading into the new year.

“We have lots of individuals who live in Minnesota who work for these large companies that have a significant amount of stock in one company and so I’m not saying go and rush and sell it, but look at the percentage that you have, because you should never have more than five percent of your net worth in any one stock,” Middendorf says.

Another big question heading into 2025 is how the Federal Reserve will handle interest rates in the new year.

University of Saint Thomas economist Tyler Schipper says many experts are expecting just two rate cuts in the new year.

“The fed story is going to be a lot of boring stories about ‘hey they got together again, and they didn’t cut rates yet,” Schipper says.

He predicts mortgage rates will fall by around half a percent in 2025, lower than many were hoping for.

“Anybody that had this idea that ‘this is going to be the year I buy a house because mortgage rates are going to plummet,’ it’s probably not going pan out that way unfortunately,” Schipper says.

Economists are also monitoring how the fed and President Trump will work together in the new year.
The two sides have clashed in the past, and they will likely have different views on the economy in the future.

So, that tense relationship could affect American consumers as well.