The Trump Tariff Impact
With the 1ˢᵗ quarter of 2025 now in the books, it is obvious investors are thinking tariffs are not going to have a positive impact on our economy.
Our stock market is often an indicator of how investors feel about the economy and the companies that make up our economy.
So far in 2025, overall economic data has been consistent. Nothing suggests gloom and doom. The non-stop talk and now the implementation of tariffs has tarnished consumer confidence. Investors are airing concerns that tariffs will hurt corporate profits.
Investor concern has pushed the major US stock indexes into the red as the 1ˢᵗ quarter comes to an end. According to the Wall Street Journal, as of Friday, March 27ᵗʰ, the Dow is down (2.23%) year-to-date, the S&P 500 (5.01%), the Nasdaq (10.2%) and Russell 2000 (9.5%).
Energy is the leading sector of S&P 500, up 8%. The 2 lagging sectors are Consumer Discretionary and Technology, down (13.79%) and (12.73%) respectively.
Over the pond, foreign stocks are up 9.03% and emerging market stocks 4.75%.
Most US bond indexes are finishing the quarter in positive territory. The yield on the US 10-year US Treasury finished last Friday at 4.253%, remaining rangebound for time-being.
Times such as these remind us of the potential benefits of a diversified and well allocated portfolio.
Employment Data and More This Week
Employment data has remained positive with new claims for unemployment staying steady. This Tuesday we will hear the JOLTS report (number of job openings), followed on Wednesday and Friday, the job creation reports for March.
Last week the Personal Consumption Expenditures (PCE) inflation index reported higher than forecast. According to LPL Financial’s weekly market commentary, inflation expectations for the next 2 years currently stand at 3.29%.
April 2ⁿᵈ is being labeled by President Trump as “Liberation Day”. Tariffs are expected to be in place, and this will begin the renaissance of US manufacturing.
Costs for someone are going to rise. Will manufacturers pick up the cost? Pass it along to consumers? Split the difference? The answer may lie in consumer demand. If demand shrinks, manufacturers may have to eat it. If not, they will pass it along,
As consumers we must budget to meet our fixed income, our “must-have” expense needs. Our other expenses, the “wants,” or discretionary items, drive a great deal of our economy. If I have a want/desire that now carries a 25% additional cost, I am not necessarily going to just buy an American-made alternative. I may simply choose to forgo my purchase and not spend the money. Truth be told, this is what I have decided with a current personal purchase desire. I’ll just wait, because it’s simply not worth it for me to pay more as I don’t want any current alternative.
Tariffs: An Income Tax or a Consumption Tax?
If the cost of goods is going to rise due to government action, to me this is akin to either an income tax increase or the imposition of a consumption tax. So much for President Trump not increasing our taxes. Rising costs, rising taxes, all come out of our pockets.
How long will tariffs be in place? Will tariffs be a revolving door or act like a merry-go-round? Will this trade war manifest into something more serious or will this prove temporary with a positive outcome?
After meeting with most clients, I can certainly hear your answers, loud and clear.
For me, it means a slow-down in economic growth. How much and what kind of impact? As always, time will tell. This time, however, we may not need to wait too long!
LPL to Acquire Commonwealth Financial
On Monday March 31st, 2025, I received an early morning email from LPL announcing the purchase of Commonwealth Financial, my prior broker-dealer. Interesting!!
Please feel free to share our weekly retirement blog with friends, family, and colleagues.
Thank you for reading.
