CEO Message
Two weeks from today I’ll be pouring my annual celebratory drink and beginning the long process of catching up on sleep. Until then it’s a blur of revising tax return drafts and responding to emails.
And keeping an eye on our possible impending trade war. That too.
-Kevin
Cracks, Corrections, and Worry
For a while there, (post election) the markets were cruising along. Inflation seemed to be cooling off, the Fed was doing its best to look calm and collected, and investors were tossing around phrases like “soft landing” like it was already in the bag. But more recently, we’ve hit a few big bumps, and some of that good-vibes-only momentum is showing signs of strain.
At the end of March, Wall Street got increasingly nervous that the latest tariff threats weren’t just a bluff. The Dow dropped over 700 points in a single day—its worst dip since last March. The S&P 500 was down approximately -6.27% for the month. I’ve even seen more than one (admittedly clever) headline proclaiming the new tariffs as Carmageddon due to their possible impact on auto prices. So what’s going on?
Why You Shouldn’t Panic
Inflation is still being a little stubborn. The Fed’s preferred inflation measure—the Consumer Price Index (CPI)—rose 0.3% in February and 2.8% year-over-year. That dreamy vision of rate cuts coming soon? It might need a reality check. On top of that, consumer confidence is starting to fade. People are increasingly uneasy about inflation and the tariffs. But hey… egg prices dropped.
Then there’s the re-emergence of trade tension. With the administration floating new tariffs, there’s concern that we could be creeping toward stagflation territory—rising prices plus slower growth, which is an ugly combo no one’s rooting for. It’s not panic-worthy just yet, but it’s enough to make investors double-check their portfolios.
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 – the prices of edible crows may go up because of the bird flu, but that’s another story.
Interestingly, while a lot of the market has been wobbling, some sectors are holding steady. Energy companies like Exxon Mobil and Chevron are having a moment thanks to rising oil prices. Healthcare stocks have also been a bit of a safe haven—Eli Lilly and United-health are examples of big names still performing well as investors rotate into more defensive plays.
No Crash, But No Party Either
Looking ahead, the outlook is mixed. Economists have trimmed their U.S. growth forecast to around 1.6% for 2025. Inflation is still expected to hover above the Fed’s 2% target, which means we’re probably not getting a sudden wave of interest rate cuts. If anything, the Fed may need to keep things tight a little longer, which puts pressure on corporate profits and, by extension, stock prices. Small-cap stocks, in particular, have been struggling—investors are sticking with big, reliable names for now.
Bottom line: the economy isn’t falling apart, but the easy optimism is fading. This might be the start of a more cautious stretch—or just a passing squall. Either way, keep your eyes open, your expectations realistic.