- GDP growth will likely slow by at least 1% in 2025, with the risk of recession rising. Some economists are now projecting a 45% chance of a recession.
- Unemployment likely rises as growth slows. Oxford Economics thinks the unemployment rate could reach 5% in 2025.
- Inflation will occur due to the tariffs raising the price of goods. According to Oxford Economics, inflation could rise to 4% in 2025. It is unclear whether this will be a one-time rise in prices or if inflation expectations could rise as well.
- Stagflation (slow growth, high unemployment and high inflation) is a risk. We don’t think it will be like the 1970s, absent a shock like the oil embargo.
We expect the Fed to be slow to act until they see more data. We believe they are currently more concerned about inflation and may not cut rates, running the risk of further slowing economic growth.
- Extension of 2016 tax cuts
- Cuts to the corporate tax rate
- Corporate tax breaks on equipment spending and structures (possibly as high as 100% and retroactive to January 1, 2025.)
- Tax breaks on tips, overtime, social security
- Raising the SALT deduction from $10,000 to $25,000
- The Optimistic View - By making foreign goods expensive, helping companies grow with tax breaks, and reaping some tariff revenue, the US will bring more production back to our country. We will eventually see increased GDP growth and better jobs as a result of private enterprise investments in the U.S. economy.
- The Pessimistic View - We get low growth, higher unemployment and higher inflation aka stagflation.
- The unpredictability of President Trump and what he does next.
- Do U.S. companies with all time high margins absorb all or some of the price increases?
- How do U.S. consumers react to higher prices?
- What is the extent of retaliation from other countries?
- Are there buyers strikes from international consumers of U.S. products?
- What are the effects of inflation on purchasing power?
We believe in having clients appropriately positioned for their financial goals and able to withstand the ups and the downs of the stock market. To that end, we reduced equity positions in February where needed, and we rebalanced individual stock portfolios to companies that would perform in a slower growth environment. The next market move is uncertain and could be up or down depending on President Trump’s next proclamation and associated reactions. Panic is not an investment concept.
Please reach out if you have specific questions, changing needs or want hand-holding.
The material included herein is not to be reproduced or distributed to others without the Firm’s express written consent. This material is being provided for informational purposes, and is not intended to be a formal research report, a general guide to investing, or as a source of any specific investment recommendations and makes no implied or express recommendations concerning the manner in which your specific accounts should be handled based on your individual circumstances. Any opinions expressed in this material are only current opinions and while the information contained is believed to be reliable there is no representation that it is accurate or complete and it should not be relied upon as such. Investing involves risk, including loss of principal, and no assurance can be given that a specific investment objective will be achieved.
The Firm accepts no liability for loss arising from the use of this material. However, Federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith and nothing herein shall constitute a waiver or other limitation of any rights that an investor may have under Federal or state securities laws.
2x Wealth Group is a team at Ingalls & Snyder, LLC., One Rockefeller Plaza, New York, NY 10020.
As Lenin famously said,” there are decades where nothing happens and weeks where decades happen.” We find ourselves in the thick of chaos, with daily political announcements and stock market gyrations. We anticipated volatility, but we got more than we bargained for.We work hard at fighting confirmation bias. In this blog, we attempt to understand different points of view and explain the steps we have taken in the current environment.
Deep Thoughts and DeepSeek
In 2024, much of the 25% equity market return came from multiple expansion. Earnings for S&P 500 companies only grew about 10%, but the amount investors were willing to pay for those earnings (P/E multiple) expanded by about 16%. Thus, about two thirds of 2024 equity performance came from multiple expansion.
In memory of famous investor Byron Wien, who was known for his list of 10 surprises each year, we provide our own list of potential economic, financial, and political surprises for 2025.
Is the Recent Runup in Chinese Stocks a Durable Rally or a Flash in the Pan?
In August of 2021, we decided China was un-investable and reduced our exposure to Chinese equities. In our blog “From Beijing to Wall Street” (here), we detailed our rationale.
Halloween Came Early
Ouch. Since August 1, the S&P 500 has fallen over 7%, a dramatic move, but not yet a correction from the July highs. However, the NASDAQ is down over 10% and firmly in correction territory.
What’s Happening Under the Covers
Why the U.S. Economy Has Remained Resilient in Spite of the Fed Raising Interest Rates and Reducing Their Balance Sheet
In memory of famous investor Byron Wien, who was known for his list of 10 surprises each year, we provide our own list of potential economic, financial, and political surprises for 2024.
If you just landed from Mars and we told you that three good sized U.S. banks had failed, the Federal Reserve had raised rates 5% in 13 months, the yield curve had been inverted since last year, the latest Senior Loan Officer’s Survey showed banks less willing to lend while already at recessionary lending levels, and according to Treasury Secretary Janet Yellen, we are within two weeks of the government running out of money to pay its obligations, would you believe the S&P 500 is up about 9% thus far this year?
How Banks Work
What Causes Banks to Fail
How the Government is Responding
How Bank and Brokerage Accounts May Be Protected
Dilemma for the Federal Reserve
We suspect most people think getting inebriated is more fun than sobering up.
We hate to sound like a broken record and ruin the party, but inflation presents a problem which won’t be easily fixed.
The four most dangerous words in investing are “this time is different”.
A Tongue in Cheek Guide to the Latest Investment Concepts
Mine your reward coins as you read our blog!
Who doesn’t love the story of David’s triumph over Goliath? This past week a group of “small” investors made tremendous amounts of money (on paper at least) by buying stocks that were heavily shorted by large, sophisticated hedge funds.
Markets hate uncertainty, and we can’t remember an election with such potential disparate outcomes. As we speak, the presidential race looks closer than ever, and the Senate majority is in question. Meanwhile the pandemic rages, and the President and Congress can’t agree on a stimulus plan. It’s no surprise stock market volatility has risen.
Fires are burning. The presidential election has never been more heated, and our whole election process is repeatedly questioned. The cold war with China continues to brew regardless of the political party in power. A global pandemic has taken hundreds of thousands of lives and jobs, created loneliness for our seniors, and caused those entering hospitals for medical procedures to endure alone.
He woke up today and asked us for an update. We explained there was a global pandemic that had claimed almost 400,000 lives worldwide and more than 100,000 in the United States.
How can we treat our ailing financial markets?
Medical experts say widespread lockdowns and social distancing must happen to contain the coronavirus and avoid overwhelming our hospital system.
the Coronavirus
Bombs and tweets couldn’t sink the S&P 500, but Covid-19 did.
While there is a role for gold in a diversified portfolio, gold is not universally liked or owned by investors and wealth managers.
The rates on overnight repurchase agreements, known as repos, suddenly rose above 9% last week.
We never really know where markets and the economy are headed, but market participants constantly look for clues.
Why does the current market tone feel different from the February and March stock market selloffs?
When do they protect you? When do they hurt you?
Worst Day Ever for the Dow Jones Industrial Average!
Perspective As the current bull market ages (from the bear market end in March 2009) investors are increasingly worried about buying at the peak.
The basic difference between a mutual fund and an exchange traded fund (ETF) is that an ETF trades like a common stock as its price changes throughout the trading day.
Brexit is spurring a flight to quality move into US Treasuries.
The short answer is yes.
