Market Commentary

Uncertainty

By Rob Sigler, MBA

March 10, 2025

Investors should not underestimate one of the biggest risks to economic growth, namely uncertainty.  While the goal to gain trading reciprocity from other nations is a good one, the timing, magnitude, and retaliatory impacts of tariffs in the short-run represent major unknowns.  Companies don’t know whether to build inventory, take pre-emptive price increases, freeze hiring, or delay capital projects.  Similarly, the DOGE-driven layoffs don’t just impact those employees who are downsized, they create uncertainty across the entire Federal employee base, as well as the private contractors who service them.  While we agree that addressing the Federal deficit is a necessity, it doesn’t come without a cost.  Taken together, tariffs and federal layoffs cause corporate and consumer sentiment to erode.  As confidence slips, so do some of the spending impulses.

And by the way, this is no longer a theoretical argument.  The Conference Board reported a sharp drop in US Consumer Confidence in its just released, 2/25/25 report.  Similarly, a handful of major retailers, including Walmart, Target, Best Buy, Macy’s and Abercrombie all lowered forward looking expectations based on recent trends.  Furthermore, consumer intentions on future travel dropped sharply.

 

That uncertainty has people worried about the job market.

 

 

Finally, corporations, faced with uncertainty, appear to be pausing spending intentions of their own.

 

 

Bottom line, this period of uncertainty will slow economic growth.  The magnitude and duration of the slowdown is unknown at this point.  That said, as we highlighted in our earlier work, this should represent a fruitful episode for fixed income securities and a pivotal moment to increase alternatives within investment allocations.

 

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