Trade war uncertainty: The markets are grappling with the ongoing lack of clarity around U.S. tariff policy. Over the past several weeks, multiple justifications have been floated for the latest rounds of tariffs, from national security to trade fairness, but none have come with a clearly defined goal or timeline. The International Monetary Fund has now cut its economic outlook for several major economies, citing tariff-driven instability as a key concern. While a 90-day timeline has been suggested for new trade deals, the scope and complexity of those negotiations, particularly across multiple nations, make this deadline feel increasingly unrealistic.
For investors, this persistent uncertainty makes it difficult to assess long-term risk. Companies cannot plan effectively without knowing whether current tariffs will be lifted, expanded, or replaced. This uncertainty tends to show up in corporate earnings, supply chain disruptions, and eventually in hiring and spending decisions.
Inflation expectations spike, consumer mood sinks: April also brought fresh reminders that consumers are feeling the strain. Inflation expectations jumped to 6.5%, a level not seen since 1981, as households brace for continued price increases. The University of Michigan’s Consumer Sentiment Index dipped again, marking one of the lowest readings in decades. Food and fuel prices remain high, and many consumers appear skeptical that relief is on the way.
While headline inflation has cooled from its peaks, the perception of rising prices still affects behavior. As prices stay elevated, consumers may delay discretionary purchases or cut back on spending, both of which weigh on economic growth. And with interest rates already high, the Federal Reserve has limited room to maneuver without exacerbating other pressures.
Businesses pull back: The latest data shows business leaders are reacting to the uncertainty with caution. Capital investment plans are being postponed, hiring intentions are weakening, and some sectors are experiencing slower order growth. Trade disruptions and rising input costs are feeding both inflation and operational hesitancy, leaving businesses less inclined to take risks.
Confidence is the key ingredient for growth. When leaders believe in a stable environment, they invest and expand. But when that outlook becomes clouded, as it has been this month, retrenchment often follows.
Looking ahead: The damage from the trade war may not yet be fully visible in the major indices, but it’s showing up in the form of diminished business confidence and weakening consumer sentiment. These psychological shifts take time to reverse. Until there is greater clarity around the future of U.S. tariff policy – it’s goals, duration, and global impact – the uncertainty will continue to weigh on markets.
We believe the clearest path back to market stability in 2025 includes three pillars:
- A durable resolution to the trade war with minimal long-term tariffs;
- A pivot toward sensible tax and budgetary policy aimed at reducing the national debt trajectory; and
- Targeted deregulation that promotes business confidence and cost efficiency.
As always, we remain focused on long-term fundamentals. If you have any questions about how these dynamics affect your portfolio or broader financial goals, don’t hesitate to reach out.
Disclaimer: This material is for informational purposes only and should not be considered financial, tax, or legal advice. Always consult with a qualified professional regarding your specific situation. All investment strategies involve risk, and there is no assurance that any strategy will achieve its intended results.