CEO Message
Happy May! Forecasts in the 70s (good), tree pollen coating everything (not good). I’ll still take this over winter though.
Let’s catch up on everyone’s favorite trade war.
-Kevin
Crow Is Not On the Menu
“I’m still in the camp that thinks most (but not all) of the tariff and trade talk is bluster and not the beginning of a long and protracted trade war where we endlessly raise prices on each other into oblivion. My prediction is that shortly after they go into effect there are some talks where the US / EU / Canada/ etc announce some face-saving measures and the worst of it is avoided. When I’m writing this monthly update 30 days from now I’ll eat crow if I have to“
I wrote the above 30 days ago and I’m happy to report that I was (mostly) right. On the day I wrote the above email the S&P 500 closed at 5611. As of this writing it is currently at 5635, or up a fraction of a percent. After the tarriffs were announced, the market plummeted, then over the ensuing weeks they were slowly rolled back, and now allegedly a number of deals are in the works. If you were in a coma for the month and just looked at your latest statement you might not even know anything noteworthy took place. So no harm no foul, right?
Not quite. The tariffs were the dominant story, but even aside from that the global economy’s hitting a speed bump. Growth is expected to dip to around 2.8-3.0% this year, down from earlier forecasts of 3.2-3.3%, largely due to trade tensions and policy uncertainty. The IMF’s latest World Economic Outlook notes that tariffs, especially ever since April 2 tariff announcements, have shaken things up, with growth projections for 2025 and 2026 revised lower almost across the board.
Economy Slows but Still Standing
Yesterday we got a negative GDP number. The economy shrank by 0.3% in the first quarter, partly because companies rushed to import goods before Trump’s steep new tariffs, like the 145% one on Chinese imports, took effect. GDP growth was revised down as consumers pulled back on spending and businesses many of their investments.
Tomorrow we get the all important jobs report. Forecasts expect 135k new jobs – if we get something above that line, it would show that companies haven’t pulled back because of the tariff uncertainty. If we get something below that number expect to see a lot of red on CNBC.
Fed Cuts on Hold, But Not Off the Table
As April closes, the outlook for Federal Reserve policy remains clouded by conflicting signals. Inflation is proving stickier than hoped, with tariff-driven price increases and persistent service costs complicating the path toward the Fed’s 2% target. While the market had priced in multiple rate cuts earlier in the year, those expectations have now tempered significantly. With GDP growth slowing and unemployment rising toward 4.1%, pressure is mounting for the Fed to step in. Many economists now project a potential rate cut as early as the June or September meeting, particularly if inflation shows meaningful progress. For now, the central bank appears to be in wait-and-see mode—balancing the risk of acting too soon against the danger of waiting too long and it remains to be seen how the tension between Trump and Powell will unfold.
Did You Learn Something Last Month?
One last note: my financial planning clients have heard this speech before, but there’s a concept known as ‘risk tolerance’ or ‘risk appetite’ when choosing your investments. Essentially its just the amount of risk you’re willing to accept to get potentially higher returns. A lot of times you may think its at a higher level than it really is, because everything sounds good when markets are rising. But during the week or two where markets were plummeting 1,000+ points per day, if you found yourself lying in bed worrying about your retirement savings or college fund, that’s a good indicator that your risk tolerance isn’t actually as high as you thought.
In the next few weeks I’ll be rolling out a free risk assessment tool you can use to identify mismatches between your real risk tolerance and what your portfolio currently looks like. More on that to come.