The year 2025 has been characterized by uncertainty, primarily due to ongoing tariff talks. Despite recent weakness in the labor market, employment remains on a firm foundation. Notably, the US Real Gross Domestic Product saw growth in the second quarter, underscoring the resilience of the economy amidst external pressures.
Early in the year, concerns about a recession emerged with the onset of tariff discussions. Fortunately, we didn’t subscribe to this perspective. Our analysis suggested that tariffs were more of a stumbling block than a roadblock. Likewise, we do not foresee a recession, and as the year progressed, we anticipated a rate cut or two from the Federal Reserve (Fed), like we saw on September 17th. We are aware the Fed’s monetary policy may shift due to political pressure rather than economic necessity but are optimistic that accelerated interest rate cuts could provide a shot in the arm for consumer confidence and spending.
While many are weary of tariffs, President Trump remains committed to them. Despite the Federal Court of Appeals ruling against the tariffs, we anticipate that the US Supreme Court may overturn this decision due to presidential regulatory authority. This political landscape adds an intricate layer to market dynamics, requiring close attention to policy developments and their potential impact. We don’t view the Trump administration as permanently committed to its tariff and immigration policies. Should these policies significantly impact growth, we believe changes could happen swiftly like earlier this year.
The administration initially stated that companies exporting goods would bear the tariffs’ costs. However, according to JP Morgan, this isn’t happening fully as expected. While businesses are looking to cut expenses to help, some costs have been passed on to consumers.
Looking forward to late 2025 and into 2026, we anticipate mild to moderate growth, supported by increasing money supply and spurred on by consumer spending, with interest rate cuts providing a bump as well. While these economic indicators suggest a favorable environment for equity markets, it is hard to overlook the appreciation in the markets these past three years.
I have stated before, and it is worth mentioning again with the current equity run, that sometimes the market gets into a pattern where “Bad News is Good, and Good News is Great”. The market is trading like it is close to this “occasional market axiom”. It’s important to note that the opposite can take effect as well at some point – “Good News is Bad and Bad News is Horrible”. Our focus in these situations is to continue to take advantage of upward and downward trends by rebalancing portfolios.
The fly in the ointment going forward could be unexpected economic declines from tariffs that could create headwinds, emphasizing the need for diversified investment strategies. While we have seen some initial data of the tariff impact, there is still more to come into next year. Our focus continues to be on utilizing companies that have the wherewithal to navigate these factors and still drive growth.
If you have any questions, please do not hesitate to contact us. We appreciate your trust and are grateful for your continued support as we navigate these complex economic times together. Thank you.
Marc Henn, CFP®
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2026 Q1