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.
Comments based on information available as of 7:30am CT on 4/25/2025
Growth: Survival Of The Fittest
Business owners scrambling to figure out their supply chains and exposure to tariffs is more than just a distraction. It could be an existential threat, especially for smaller businesses that don’t have the scale or resources to have the same supply chain flexibility as larger firms. More than 34% of private sector employment is at firms with 100 or fewer employees and they may feel the brunt of any short-term adjustment costs. Tariff clarity can’t come soon enough.
Inflation: A Process, Not An Event
There’s a long distance between China and the U.S. and there can be a long time between costs that affect Chinese exports and price increases U.S. consumers see. In 2018-2019, U.S. importers initially ate most of the cost of tariffs. Tariffs were lower and narrower back then, so the dynamics could be very different this time. The cost of tariffs could initially fall on importers and then be spread backwards to exporters and eventually forward to customers.
Policy: Everyone Needs A Scapegoat
The markets responded favorably when President Trump toned down the rhetoric on whether he would try to fire Chair Powell. Fed independence is an important ingredient of investor confidence, so the last thing investors needed was a fight over the Fed. Plus, there is a long history of presidents using the Fed as a scapegoat for unfavorable economic outcomes, so keeping Powell as a foil might make a lot of sense.
Looking Ahead: Thermometers And Thermostats
A thermometer tells you the temperature. A thermostat controls the temperature. Market prices are thermometers that tell you what investors are thinking about the future. Fundamentals, like earnings, are thermostats that can change prices. It’s still early in earnings season, but despite the tariff tumult, the guidance given on tariffs, while often vague, isn’t giving a wholesale reason for worry.
