As we move into the second quarter of 2025, we want to take a moment to share our latest thoughts on the economic and market environment, especially as it relates to potential policy changes ahead.
A key date on our radar is April 2nd, which may mark the beginning of a new wave of tariffs. While headlines might focus on the potential for a trade war, we think there’s an important silver lining: clarity. Right now, businesses are operating in a cloud of uncertainty. If tariffs are indeed implemented—whether with or without major retaliation—companies will finally have a clearer sense of the rules of the road. That clarity, even if imperfect, allows them to adjust, make decisions, and move forward.
Of course, if we do see a more aggressive tariff regime, it could weigh on economic growth. Tariffs can be disruptive and inflationary. However, we believe any price increases will likely be kept in check by a slowing economy, which naturally dampens inflation. Importantly, we do not expect a recession in 2025.
Some investors are also worried about how tariffs might affect government revenue and the deficit. While the idea of using tariffs to raise money may sound appealing, in practice, the impact would likely be limited—especially if accompanied by tax cuts that reduce income tax revenue.
It’s also worth pointing out that today’s economy is very different from 2018, the last time the U.S. leaned heavily on tariffs. Back then, the focus was mostly on China. Now, we’re seeing a broader, more global approach. And unlike in 2018, companies have since realized—especially after COVID—that they have more power to raise prices than they previously thought.
We believe “Trump 2.0” will look different from “Trump 1.0.” Last time, we saw tax cuts first, then tariffs. This time, we expect the sequence to be reversed: tariffs first, and tax cuts later. That matters for markets, because tax cuts can provide a meaningful boost to company earnings and investor sentiment.
Finally, one more big difference: the Federal Reserve. During Trump’s first term, the Fed was raising interest rates. Now, it looks like they may start cutting rates as early as May, which would provide another source of support for the economy and markets.
In short, while we expect some turbulence ahead, we believe that inflation will stay under control, the economy will avoid a recession, and there may be positive developments later in the year, including lower interest rates and potential tax cuts. Ultimately, we see stocks trading at record high levels by the end of the year.
As always, we’re here to help you stay grounded, focused, and aligned with your long-term financial goals. Please don’t hesitate to reach out with any questions or concerns.
Sincerely,
Kessler Investment Group, LLC
All information in this presentation is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic performance data is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. Certain statements contained within are forward looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Please consult your adviser for further information.
Opinions shared in this presentation are not intended to provide specific advice and should not be construed as recommendations for any individual. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.