Macro & Market Musings are weekly insights on Growth, Inflation, Policy and Looking Ahead from Annex Wealth Management’s Chief Economist, Brian Jacobsen. Brian, a frequent contributor on CNBC and Fox Business News, hosts regular updates on the economy and markets. Check our events page for Brian’s next live event.
Growth: Talk Isn’t Cheap If It Works
The market seemed to appreciate that President Trump’s day one agenda did not include imposing tariffs on trading partners. He spoke about tariffs, but he didn’t pull out the presidential pen to sign any orders hiking tariff rates. Talk of tariffs can be an effective policy tool, but only if people believe he will actually carry through on the threat. He will if necessary, but he likely won’t have to.
Inflation: The Fed’s Number One Priority
The Federal Open Market Committee has a policy meeting this upcoming Wednesday. Last time they met they signaled they might cut back on the pace of rate cuts. They upgraded their growth forecasts and downgraded the inflation outlook. While their policy statement in December said that the risks to growth and inflation were roughly in balance, their projections implied the risks are anything but balanced.
Policy: Getting Down To Business
Extending the 2017 Tax Cuts and Jobs Act is a high priority for the new administration. High priorities do not necessarily get passed quickly. There is disagreement as to what priorities should be bundled together, whether there should be one bill or multiple bills. With a razor-thin majority in the House, the clean sweep of the House, Senate, and White House by Republicans does not make passage a slam dunk. It will likely still happen, but probably not without drama.
Looking ahead: From Elections To Earnings As A Catalyst
If 2024 was the year of the election, 2025 is the year of earnings. Earnings have been fundamentally improving, but how long can that last and how much can they rise? According to Bloomberg estimates, earnings for the S&P 500 might have risen nearly 7.5% in 2024. The consensus is calling for over 14% growth in 2025. As interesting and exciting as government policies are, perhaps the real catalyst to moves in the market will be shifts in earnings expectations.
