In Limbo

Answer: Making predictions, especially this year, is risky business. We do expect more moderation than momentum. At the time this is being written, there’s still uncertainty around tariffs, trade policies, and increasing geopolitical tensions. With so many questions, it’s challenging for companies to make any decisions about capital investment, hiring, and spending, let alone make meaningful earnings forecasts.

Volatility and uncertainty in the short term are always a given. This year, we’ve added the nuance of tariffs. It could be said that we’ve seen the worst of things since Liberation Day on April 2, when the concept of tariffs was announced. Since that time, we’ve rallied 25% of the lows that followed the announcement. It’s not unusual for stocks to enter a consolidation phase to digest gains and establish a base.

Trade tensions have somewhat eased; it appears all involved recognize that compromise will benefit all involved. We can’t be lulled into complacency, however, as pressures could easily reignite. China does have a strong incentive to negotiate with us because of its dependence on exports. Recently, shipments from China to the United States have increased. This is a positive sign that we may be moving past peak trade-related uncertainty, hinting that the impact of tariffs may not be as severe as initially feared as we continue to climb the Wall of Worry. As always, stocks are subject to risks and fluctuate in value, emphasizing the need for a personalized financial plan to match your risk appetite.

Rather than making predictions, we focus on trends and processing data to evaluate changes and the investment connotations. As we enter a new economic environment, the outcomes of negotiations will impact markets now and into the future, as details will take time to be resolved. Central Banks have a vital role in this delicate dance as they evaluate and direct the path of interest rates. Lowering rates could help growth, but may also cause inflation. The Fed will likely remain patient and cautious as events unfold.

At first glance, markets seem to have calmed. Yet developments in Washington around tariffs and the upcoming tax and spending bill could stir up volatility. An increase in the debt ceiling is necessary to avoid government default later this summer and is part of the tax bill package. The bill is expected to pass sometime between July and August, so there’s not much time for delays or room for drama.

Clarity and good news on trade negotiations and the tax bill package would obviously remove uncertainty and lessen volatility. This would give consumers and businesses greater confidence, allowing them to make informed decisions about production and consumption.

Flood light or laser beam

As of June 15, the US tariff on all Chinese goods remains at 30%, plus a 25% tariff on particular sectors. Broad-based tariffs are like a flood light affecting everything, whereas sectoral tariff targets are more like a laser beam, imposed only on specific goods in designated industries. Interestingly enough, the sectoral or laser beam type of tariff on electronics, an essential export for China and vital import for the U.S., has yet to be decided. The United States has obtained a pledge from China to resume rare earth exports, although apparently for only six months.

The outlook for the remainder of 2025 looks like slower growth with more cautious corporate earnings. This is due to higher tariffs, reduced government spending, and weaker consumer demand. Companies and consumers are working with tighter margins and slower growth. Slow growth is still growth, though.

No one can predict the future given the enormous number of variables, including economic data, fiscal and monetary policies, consumer sentiment and behavior, geopolitical events, and of course, politics. What we do know is that a good place to start is by having a personalized strategic plan tailored to address and match your situation. Stay focused and plan accordingly.