As businesses look ahead to 2025, the outlook is marked by a blend of cautious optimism and some remaining uncertainty as the political tides change.
“With a new administration in Washington, sentiment from business owners and leaders across the country reflects a combination of opportunities and challenges within the business landscape,” noted Alan McKnight, chief investment officer at Regions. “The impact on businesses will vary – and be very specific to industry and customer profile.”
Reflecting on the earnings season, McKnight points to a tale of two retailers with one big-box store reporting knock-out numbers from the third quarter while one of its key competitors swung and missed, noting that their consumers are currently feeling financially challenged. This dichotomy reflects how the larger economy may be impacting consumers and subsequently the businesses that serve them.
Top row, from left to right: Alan Mcknight, Richard Moody. Bottom row: Mary Beth Coke, Caroline Vérot Moore, Scott Wall.
More on the Economy
From a broader economic perspective, Regions Chief Economist Richard Moody noted that the expectation going into 2025 is that the economy will continue to grow at a more normalized pre-pandemic rate. Moody recently headlined Regions’ hosted Economic Forums alongside McKnight in Atlanta, Charlotte and Birmingham to talk about what’s next for the markets and economy.
“There is considerable uncertainty around our baseline forecast depending on the specific mix of fiscal, trade, immigration, and regulatory policy, and we will be adapting accordingly as we get more specific details on proposed policy changes,” noted Moody.
Moody and Mcknight offer additional insights their 2025 Market Outlook.
What Local Commercial Bankers Are Hearing
Commercial Banking leaders throughout the Regions footprint shared their insights on the key elements influencing the cautious optimism they are hearing from business clients going into 2025. Having the election question answered posed new questions about how the campaign rhetoric will be put into motion.
“People wanted to have this election behind them,” Caroline Vérot Moore, Greater Houston market executive and commercial banking leader told Chandler France, reporter for the Houston Business Journal, in an interview in November following a Regions-hosted economic forum in that market. “That uncertainty is what was preventing them from making certain decisions.”
In Central Florida, Market Executive and Commercial Banking Leader Scott Wall shared that his team has seen a pickup in activity from business owners and leaders following the election, signaling optimism about the future.
From the economic perspective there are expectations of easing inflation, lower interest rates, reduced prices and increased American manufacturing.Scott Wall, Market Executive and Commercial Banking Leader
“We’re hearing positive feedback from our clients as we talk about their outlook on the new year,” said Wall. “From the economic perspective there are expectations of easing inflation, lower interest rates, reduced prices and increased American manufacturing.”
Wall’s team is also hearing enthusiasm for growth through investments in real estate, equipment, acquisition and overall business expansion.
“Tourism is a huge economic driver in Central Florida and there is a lot of anticipation around the opening of the Universal Epic Universe, which will presumably have an outsized impact on tourism this summer.”
We sat down with Moody, McKnight, Coke, Vérot Moore and Wall to take a deeper dive into their respective outlooks on the business landscape – and what may be influencing their perspectives moving into the new year.
A New Administration in Washington
Key issues dominating national debates during the 2024 election were the economy (with voters citing inflation, wages, taxes and economic stability as key drivers influencing their decisions), immigration, and geopolitical turmoil.
A lot of the campaign rhetoric came with declarations of immediate action to address the latter two, and both have the potential for notable impact on the business landscape. This has Moody questioning if people are being mindful enough about the potential downsides.
I am cautiously optimistic going into 2025 and anticipate that the economy will remain strong.Alan McKnight, chief investment officer at Regions
“On the upside, the 2017 Tax Cuts and Jobs Act will probably be extended by this Administration, and it will create more favorable regulatory environment for businesses, but higher and more broadly based tariffs have the potential to push prices higher,” said Moody who noted that half of all inputs in the country are raw materials or intermediate goods used to produce goods.
“The next three to six months will be critical to see which of Trump’s campaign policies get enacted or not,” McKnight said during the Houston event, “I am cautiously optimistic going into 2025 and anticipate that the economy will remain strong.”
Impact of Tariffs and Immigration Reform
In Atlanta, the Commercial Banking team led by Market Executive Mary Beth Coke has observed that there is an expectation that China will devalue currency and push prices down to remain competitive. She said companies she works with are starting to look at other countries – including Vietnam, Korea and Indonesia – for manufacturing, noting that existing trade policies in China make it difficult to do business there.
While many companies that import goods from China are concerned about making up the margins on tariffs that will inevitably be passed on to them, there are other companies with a more favorable view, noting that their biggest competitors are in China.
“We have seen clients in certain industries trying to quickly send purchase orders into Asian suppliers in anticipation of proposed day one tariffs,” said Vérot Moore. “This is causing a decrease in short-term working capital as they are essentially trying to front-load raw materials to meet 2025 production estimates.”
Vérot Moore said others are concerned that they will have to pass the additional costs onto their consumers which would be disruptive to the way they do business.
“The uncertainty is creating some fears and doubts on how to hedge, specifically on switching to American products versus imports due to increased costs.”
Barrett Daws, Commercial Banking relationship manager on Coke’s team, pointed to immigration reform as creating some concerns for businesses in terms of the labor markets, citing a potential push for higher wages.
“In some of the hourly roles there is a potential return to more consistent turnover in staffing, similar to what occurred in 2021,” said Daws.
In Central Florida, Wall notes that business owners see potential for a shrinking labor pool based on the threat of deportation, which could affect certain industries that are notable in this market, including construction and agriculture.
The Case for Business Growth
With the proposed fiscal, trade and regulatory changes top of mind with the new administration, sentiment points to a more business-friendly climate in 2025 – and this may also have a positive impact on foreign businesses looking to move into the U.S.
“The U.S. is attractive to overseas companies, and we may see more foreign businesses looking to move into this country,” said Moody.
Locally, many commercial business owners and leaders believe changes hailed by the new administration will have a positive impact on business growth. Many in Texas have indicated that since they did well during the first Trump term, they are cautiously optimistic about the second.
Oil and gas are big business in Texas and many in this industry seem confident that the new administration will be good for business, though they acknowledge that Trump’s agenda could be inflationary and interest rates could be higher for longer.
What Local Commercial Bankers Are Saying
“We want to maintain a regular dialogue with our clients around both their businesses and the macro conditions,” noted Wall. “And as the rate environment changes, we are reviewing their situations to advise on what may make the most sense based on conditions in the moment with liquidity options for cash management such as using an investment sweep versus a money market deposit account versus an earnings credit rate.”
Coke noted that business owners should be prepared to take advantage of the opportunities that may arise in 2025.
As strategic advisors, our teams are proactive in providing advice and solutions to meet clients’ needs in 2025 and beyond.
Mary Beth Coke, Market Executive
“Many business owners have been on the sidelines in 2024,” said Coke. “As strategic advisors, our teams are proactive in providing advice and solutions to meet clients’ needs in 2025 and beyond.”
Absent a crystal ball, there is no way to know for sure what lies ahead, but as Moody aptly titled his 2023 and 2024 economic outlook titles, “Lots of Stuff May or May Not Happen in 2023” and respectively “Even More Stuff May or May Not Happen in 2024,” stuff may or may not happen so having consider regular check-ins with your commercial banker as you navigate the changing landscape.
You can find these and Moody’s regular economic commentary in the Insights and Commentary section of Doing More Today.
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