Luke Ervin, CIMA®, CEPA® is a Senior Vice President–Wealth Management and leads the Mission Family & Business Group at UBS Financial Services Inc. in the Carmel Valley branch in San Diego, CA. Luke oversees financial affairs for a select group of business owners, entrepreneurs, corporate executives, professionals and their families around San Diego. For over 20 years, Luke has focused on helping clients achieve their financial goals through a comprehensive and holistic wealth management process.
With an expansive range of experience in wealth management, Luke has studied for and earned the Certified Investment Management Analyst® (CIMA®) and Certified Exit Planning Advisor®(CEPA®) designations. Luke and his team are passionate about assisting others through life’s numerous financial stages, helping clients formalize a plan for their legacy and supporting them toward the realization of their goals, through a disciplined and tested approach.
Luke focuses on financial and retirement planning, customized portfolio management, and lending and insurance strategies for business owners, entrepreneurs, and executives of privately-held growth companies. In addition, he guides business owners to drive growth and plan for a successful exit by leveraging UBS’ resources and collaborating with other business advisors, often advising on employee benefits and cash management services.
UBS is a leading global wealth manager, focused on helping clients achieve their financial goals through personalized advice, solutions, and products in more than 50 countries around the globe.
In this Q and A, Luke shares with us some key insights from UBS and other economists for business owners and affluent families as we head into 2025 under a new political administration.
Q. With the change of administration in the US, what does UBS anticipate could be the outlook for the economy?
A. Recent market and economic developments since the start of the 2020s have led some to suggest we are in a new “Roaring 20s,” marked by high economic growth, strong market returns, and improving productivity. Global equity markets are up by around 50%, US nominal GDP has increased by over 30%, and US corporate profits are up nearly 70%. This has happened despite global pandemic lockdowns that triggered the largest spike in interest rates and inflation in decades, plus outbreaks of wars in Eastern Europe and the Middle East.
As we now approach the midpoint of the decade, the implications of the US election result have created concerns. A key question is whether US political change might extend or end the Roaring 20s? An upside scenario would see lower taxes, deregulation, and trade deals adding to a positive market narrative built on solid growth and continued investment in artificial intelligence. The risk scenario is that trade tariffs, excessive fiscal deficits, and geopolitical strife will contribute to higher inflation, weaker growth, and market volatility.1
Q. Is US exceptionalism likely to continue?
A. The US has defied not only recession forecasts but also has been running at a pace higher than expected after rate cuts began. Real GDP grew nearly 2.8% in 20242, faster than the 1.8% pace many policymakers consider to be the “trend” growth rate. Higher growth despite the stubbornness of inflation have resulted in a 5% nominal growth economy. But the Roaring 20s have been largely a US phenomenon. In the year ahead, we expect US economic growth to slow somewhat but remain close to 2%3 because many of the key factors that have sustained US economic growth in recent years are likely to persist: healthy consumption, loose fiscal policy, and lower interest rates.
Q. Will the Fed continue to cut rates?
A. Although originally UBS thought the Fed would continue to cut interest rates by another 100 basis points in 2025, recently Fed officials indicated they now expect to cut rates by just 50 basis points in 2025, which would likely mean just two rate cuts among their eight policy-setting meetings. That’s down from four cuts in their September 2024 projections4. Resilient US growth has given the Fed a reason to not cut rates.
Q. Can consumption continue to stay up?
A. Consumers have been powering the above-trend growth in the US. Despite still-gloomy sentiment, US consumers have been the primary driver of US growth and there is reason to believe the strong trend can continue:
- Consumer balance sheets are very strong. According to the Federal Reserve, Americans in the middle quintile of incomes saw their net worth increase around 50% compared to pre-pandemic levels. Revisions to the savings rate data made 2024 show a much healthier consumer than initially thought, with more room to run.
- Home prices continue rising and some consumers are again starting to take out HELOCs, another tailwind for consumption.
- Real wage growth remains positive. Wage growth currently trends around 4%, outpacing inflation, and providing a sustainable source of consumption growth for the intermediate future.
- Although credit card debt and delinquencies are seen rising and this could portend cracks in the consumer story, a deeper dive into the data shows that delinquencies tend to be focused on lower-income consumers who have an undersized effect on overall consumption. These could possibly subside if/when interest rates continue to go lower.
However, there is a cautionary tale here as well. If the Trump administration imposes tariffs on foreign goods, especially goods from China, as it has suggested, then consumers may be spurred to increase precautionary savings.
Q. Is unemployment likely to decline or to increase?
A. Although the unemployment rate is rising slightly, hiring is still expected to remain healthy. Job openings have declined from their record high levels to numbers more in line with the previously healthy labor market of 2019 prior to the pandemic. Premiums paid to hire job quitters have also narrowed, reinforcing other measures of labor demand.
Layoffs aren’t a concern yet. Despite demand cooling, both continuing unemployment claims and initial jobless claims remain very low and are not indicative of an imminent recession. Firms may be wary of hiring workers, but they are not letting go of workers in this robust economic environment.
One change could be slowing or reversal of immigration under Trump 2.0. Over the last few years, the labor supply has grown, driven mainly by the net positive flow of immigrant workers. Since limiting immigration has been a key campaign issue, immigrant hiring is likely to slow or even reverse under the new administration.
Q. What is your conclusion for investors and business owners?
A. Realistically speaking, the unpredictability of this decade so far should remind all business owners and investors of the importance of humility and market diversification. But it should also remind us of the power of innovation, adaptability of the economy, and the potential for long-term market growth. Never underestimate the flexibility of the American market nor the American consumer.
