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: An Air Pocket Or Freefall?

Services is slowing and manufacturing activity is stutter-stepping. Many business executives are saying they’re waiting to see how trade policies evolve before making expansion plans. The Atlanta Fed’s GDPNow estimate says the economy is contracting at a 2.4% annualized pace. However, this estimate is likely severely distorted by businesses stocking-up on provisions just in case tariff threats become a reality. Tariff uncertainty isn’t being resolved, it’s being prolonged; but that’s only for now. First quarter weakness may bleed a little into the second quarter, but the bounce back could (hopefully) more than compensate for the hiccup.

Inflation: A Permanent State Of Transitory?

Inflation is still above the Fed’s target and it may move further away before drifting back. After being burned once by declaring that the COVID-era inflation was only transitory, the Fed may be laughed at if it says tariff induced price increases are also transitory. If every time inflation starts getting close to target we get another inflation disruption, the public might start thinking we’re in a permanent state of transitory inflation. The Fed may need to squawk hawkishly to help push inflation expectations lower.

Policy: The Cloud Behind The Silver Lining

This might be a time of peak policy uncertainty. Will there be tariffs? How much will they be? Will they be disruptive or productive? Will the Fed stay on pause, be forced to cut rates due to weaker growth, or be forced to hike rates due to more inflation? Policy uncertainty hangs over the economy like a storm cloud. But there is a silver lining that companies are incredibly adaptive. The lesson of history is that companies adapt to continue to create value for shareholders. Right now the market is more focused on the cloud than the silver lining. That can change quickly though.

Looking Ahead: Patience Trumps Action

Uncertainty does not have to resolve in a bad way. It often resolves positively. Profits and the stock market have gone up over time despite the ever-present existence of uncertainty. Reacting to uncertainty can lead to hasty decisions, which can mean selling just as prices are bottoming. Waiting for clarity–which rarely comes–often means waiting too long to re-enter the market. Emotional investing leads to buying high and selling low, the exact opposite of what investors want to do. Focus on a well-thought-out strategy and stay the course. While it might seem like the market rewards bold and quick moves, investing is more about patience and diversification.

Comments based on information available as of 7:00am CT on 3/7/2025