Did you miss The Broadcast in January and February? Me too! I've written approximately 57 different versions of this newsletter since mid January. What started as piece on AI competition ramping up with China (Deepseek vs. ChatGPT, remember that?) quickly pivoted to Tariffs, then a pause in Tariffs. Next the Department of Government Efficiency (DOGE) was my headline, then Tariffs being on, then off. I felt like a proverbial pinball getting bounced all around the table.
Throw in a side of Ukraine, falling interest rates, a tick up of inflation and yours truly couldn't quite synthesize my writing into a unified coherent post. (Side note: does anybody know a good editor they could introduce me to? Kidding - but only slightly.)
Before I share all that I've writing about over the past month or so, I have an important update regarding my advisory fees:
As we move into the second half of 2025, I wanted to give you a heads-up on a small adjustment to my advisory fee. Starting July 1, 2025, my standard fee will be increasing from 0.6% to 0.7%. This change reflects the continued value I strive to provide - helping you navigate markets, plan for the future, and make smart financial decisions in an ever-evolving landscape. My commitment to delivering personalized advice, proactive strategy, and top-tier service remains unchanged.
Over the coming months, I'll be sending each of you an amendment to your existing client agreement detailing the change. Other than that, it's business as usual.
If you have any questions, let’s chat - I’m always here to make sure your financial plan stays on track.
Now without further ado, The Broadcast.
Tariffs: Back to the Future
If the current tariff talk feels like déjà vu, that’s because it is. Cue the DeLorean, fire up the flux capacitor, and set the dial to 2018 - the last time we saw a full-scale trade war unfolding before our eyes. Back then, President Trump decided to take a swing at global trade, slapping tariffs on steel, aluminum, and a hefty chunk of Chinese imports in an effort to protect American industry and reduce reliance on foreign goods. The theory? Make imports more expensive, push companies to “Buy American,” and, in the process, fix what Trump saw as an unfair playing field.
Of course, much like Biff getting his hands on the Sports Almanac, things didn’t go exactly as planned. China retaliated hard, hitting back with tariffs on $110 billion worth of U.S. exports, particularly targeting farmers, automakers, and tech companies—all sectors that were crucial to Trump’s voter base. Prices on consumer goods ticked higher, supply chains scrambled, and while domestic steel saw a brief boom, many businesses paid the price (literally) in higher costs.
Flash forward to today, and - just like Marty McFly returning to a very different Hill Valley in 1985 - we’re staring at a reboot of the same trade battle. The Biden administration, despite early speculation that it might roll back Trump’s tariffs, left most of them in place. Now, with Trump back into the Oval Office, there’s a new round of tariffs, this time even broader and steeper. His 2024 campaign floated massive levies on Chinese goods and new taxes on imports across the board . Now, the seemingly daily announcements of new tariffs are sending markets (and global trade relations) into another time-traveling tailspin.
So, are we about to relive the 2018 trade war, this time with more tariffs and bigger global implications? All signs point to yes. The only question is: will this sequel have a different ending with American businesses and our economy flourishing in a new global order, or are we destined for a prolonged round of retaliatory tariffs, price hikes, and economic uncertainty? Strap in - because much like time travel, trade wars have a way of getting messy.
The Stock Market in 2025
With the exception of Tech and Small sized companies, both US and International markets had solid returns in the first two months of the year:
Then Beware Ides of March?
As you can see, thus far in March there has been a continued slide in the domestic markets. International markets, have continued to outperform however. (Just another reminder that broad based global diversification does work!)
So what does this all mean and why has the stock market declined so sharply, so quickly?
From all the research I've done (and believe me it's been A LOT) the Trump Administration is working under two assumptions:
- The rest of the world relies on the U.S. for all things economic, whether it's paying the bills or spurring growth
- Many of the departments and services managed by the U.S. Government would be better off being either eliminated or privatized (enter DOGE and a huge cut in government spending)
Just today Treasury Secretary Scott Bessent said the following during an CNBC interview in regard to the current state of our economy:
"Look, there's going to be a natural adjustment as we move away from public spending to private spending. The market and the economy have just become hooked, and we've become addicted to this government spending. And there's going to be a detox period."
He also said this about the sweeping tariff policies:
"And what we are trying to do is make free trade, fair trade because the trading systems have become incredibly imbalanced. You see it with these gigantic the trade deficits that we run. You see it with the big surpluses that other countries are accumulating. So we’re going through, we’re looking at tariff barriers, non-tariff barriers, currency manipulation, government subsidies, and in the E.U. some of these gigantic fines that they’re putting on our tech companies just because they see a big pool of capital. And you know, we’re going to push back on those. And at the end of the day, President Trump’s been saying, tariff is his favorite word. I think reciprocal may be his second favorite word."
I believe we can frame any current and future decisions on the above...how will they work out? Stay tuned.
Inflation – The Fed’s Favorite Anxiety Trigger
Inflation ticked up again in February, with prices up 0.2–0.3% month over month. On the bright side this was at a more relaxed pace than January’s 0.5% climb. Year over year, inflation clocked in at around 2.8–2.9%, a minor dip from last month’s 3.0%. But before we start popping champagne, let’s be real — while energy and food are behaving, services inflation (housing, healthcare, insurance) refuses to cool off. Shelter costs (+4.4% YoY) are still the biggest culprit, and while rent growth is slowing, it’s not exactly doing a full stop. Meanwhile, goods prices are mostly steady or falling, but used cars decided to go rogue and jump again.
So, what’s keeping inflation from breaking below 3%? A still-hot economy, strong wage growth, and a job market that refuses to crack.* The Fed is holding rates steady for now, watching closely as new tariffs on China threaten to stir things up later in the year.** The consensus? Inflation will hover near 3% for a while, with a slow crawl down — unless, of course, something wild happens (and let’s be honest, when doesn’t it?***).
*Then March began and the stress of tariffs, et al seem to be cooling the economy and job market.
**The Job Market may actually be cracking
***Something wild seems to happen daily - see intro section.
Corporate Earnings – The Good, the Bad, and the Volatile
January's stock market results were solid, as solid corporate earning reports started trickling in. Q4 2024 earnings have proven to be solid with 77% of S&P 500 companies reporting positive earnings and a growth rate of 17.8% which was the best since Q1 2021.
The story for Q1 2025 may not be as shiny with analysts predicting lower earnings caused by some combination of the issues mentioned above. Regular readers know that earnings are one of my top 3 favorite (if not most important) topics to watch. At this point, I tend to agree with the analysts that Q1 may be lackluster.
I also always bet on Corporate America to figure out how to make money, a view that Warren Buffett recently echoed in his latest Berkshire Hathaway shareholder letter (always a good read):
"Businesses, as well as individuals with desired talents, however, will usually find a way to cope with monetary instability as long as their goods or services are desired by the country’s citizenry. So, too, with personal skills. Lacking such assets as athletic excellence, a wonderful voice, medical or legal skills or, for that matter, any special talents, I have had to rely on equities throughout my life. In effect, I have depended on the success of American businesses and I will continue to do so."
Deregulation – Still a Mystery
The administration says they want to roll back regulations, but so far, it’s mostly talk. Finance, energy, and other industries are waiting to see if these promises turn into action, or if it’s just another season of Regulatory Survivor. For now, we watch and wait.
Bitcoin – The Crypto Rollercoaster Continues
Bitcoin has been doing what Bitcoin does best—being extremely unpredictable. Prices have swung wildly as investors react to regulatory news, speculation, and whatever Elon Musk is tweeting about. The White House has stated there will be a more crypto-friendly stance, which could boost adoption, but let’s be real—no one is buying groceries with Bitcoin just yet. (And if they are, I’d love to know where.)
Jobs & Immigration – The Labor Market Tug-of-War
Unemployment ticked up slightly to 4.1%, which is still historically low but not the direction we’d prefer. Meanwhile, concerns over immigration policies leading to labor shortages—especially in industries like agriculture and hospitality—are growing. Long story short, finding workers is getting trickier, and that could have ripple effects across the economy.
It also seems that the impacts of DOGE's attempts to streamline the government workforce are only in their early stages. While it's early days, eliminating thousands of jobs will only add to the stress of our labor market.
Taxes – Lower? The Same? TBD.
The Trump administration 2.0 is pushing to extend the 2017 tax cuts and bring back state and local tax (SALT) deductions. That could mean more money in our pockets and fatter corporate profits—good news for the stock market. Of course, none of this is set in stone yet, so we’ll see if Congress plays along or if we’re in for another round of tax-policy ping pong.
Ok, now what?
If you've made it this far, first off thank you for reading!
Second and most importantly, while my optimism has waned over the past few weeks I still believe that our economy is still in good shape - at least for now.
I'll continue to monitor the news out of Washington D.C. and be in touch with any major news or policy changes. Until then, I encourage you to stick to our respective plans and hold on for what may prove to be a bumpy ride.
Until next time, take good care!
Steve