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: The Trend Is Your Friend
Usually earnings season grabs the headlines. The media has instead been focused on tariff threats. Earnings growth has been better and broader than expected. While changes in policies can be a shock to the system, sometimes those shocks are good and sometimes they’re bad. The trend does look like it’s towards continued growth, not decline.
Inflation: Seasonal Affective Disorder
January’s consumer inflation numbers were hotter than expected. That’s ironic considering how cold January was. Rent inflation is slowing, but auto ownership costs, food prices, and the price of energy products powered the consumer price index higher. There are also seasonal distortions that can make January’s numbers suspect. A lot of firms reset prices as the calendar turns and the statisticians in the government sometimes have a difficult time adjusting for those seasonal effects.
Policy: More Talk Than Action, So Far
Tariffs on Chinese goods have gone into effect. All of the other things that have been discussed–reciprocal tariffs, steel and aluminum tariffs, and tariffs on Canada and Mexico–haven’t actually gone into effect, yet. That opens the door the negotiations. The old saying is “don’t count your chickens before they hatch.” A similar thing can be said about tariffs.
Looking ahead: Resist The Bearish-Bias
There are always things to worry about. It’s easy to imagine the myriad ways that things can go wrong. Yet, 69% of the time over a twelve month horizon stocks have been up instead of down. It’s easy to have a bearish-bias, but it’s rarely profitable. Market multiples like price-to-earnings ratios are elevated and tariff-related headlines can trigger volatility. However, the overall economic and earnings outlook remains positive, so any volatility might be more of an opportunity than anything.
