Comments based on information available as of 7:30am CT on 3/28/2025

Growth: Starting On A Strong Foot, But Will It End That Way?

Fourth quarter economic data and earnings releases showed businesses came into the year on a strong foot. Despite that, there has been a persistent divide in consumer spending with higher income earners pushing spending higher while lower income earners struggle to make their money last as long as the month requires. That’s nothing new, though. It may be getting worse as financing costs remain elevated and real wage gains slow.

Inflation: A Race To The Middle

Over the last few months, goods price deflation has turned to mild inflation. That could accelerate, at least temporarily, with tariffs. Service sector inflation has begun to simmer down, though it’s still too high relative to the Fed’s target. Considering how in the US service sector spending dominates good sector spending, the overall inflation picture could look unchanged despite lots of changes underneath the surface.

Policy: This May Hurt A Bit

When you go to the doctor and she is about to give you a shot she might say, “This may hurt a bit.” The warning is nice, but it still hurts. With “Liberation Day” coming up quickly, the market has been moving in anticipation of the pain. But will the pain and side-effects be worth the possibility of lower trade barriers? Differences of opinion make for a market and those differences are stark.

Looking Ahead: Fears Versus Reality

Markets move on expectations and perceptions. Reality does not always conform to market views, and that’s what can amplify market volatility as investors need to check their hopes and fears against what’s real. Markets may continue to be on an emotional rollercoaster. We don’t mind fading the fear of a slowdown, at least for now.