We hope everyone is having an enjoyable summer and we look forward to connecting with you soon. At Landing Point Financial Group, we continue to provide relevant economic and financial markets information to clients, with the purpose of educating and providing insights about events that could impact your investment portfolios and financial goals. Below is a summary of events that have impacted investors during the first six months of 2025.
Investor sentiment was generally mixed at the start of 2025 as investors were balancing “looking back” with “looking forward”. Investors were “looking back” and reflecting on a good 2024 that resulted in positive returns for the S&P 500 (+25%), Dow Jones Industrial Average (+15%), and NASDAQ Index (+29%). However, investors were also “looking forward” and concerned about economic policy uncertainty, sticky inflation, geopolitical risk, and economic growth concerns. The mix of “looking back” and “looking forward” resulted in relatively flat financial markets for the first few months of the year. However, as the year progressed, tariff uncertainty quickly became the primary focus and concern for consumers, businesses, and investors. This culminated with the announced “Liberation Day” on April 2 which resulted in a stock market drawdown as many stock market indexes reached bear market territory (-20% stock market decline from the peak) in the following week. During this period of extreme volatility, Landing Point Financial Group sent a communication to clients (Riding Out Market Events). In that communication, we mentioned the catalyst of the short-term volatility being a “controllable” event (tariffs), whereby tariffs could be removed/reduced/paused at any time. Thankfully, tariffs were largely paused or reduced in mid-April. The combination of all those events lead to a “V” stock market recovery, a quick and sharp stock market drawdown, then a quick and sharp stock market rally. Ironically, the significance of interest rate cuts, inflation, and current economic data was largely ignored during this period of short-term volatility in early April.
Inflation
Inflation is the general increase in prices for goods & services in the economy. Inflation that is too high can negatively impact businesses and consumers. However, it is important to remember that each individual has their own unique inflation situation.
Rising and sticky inflation was the primary concern for the Federal Reserve Bank (Fed) over the past few years. The Fed uses a 2% inflation target which is supportive of a healthy economy. Inflation (as measured by CPI, Consumer Price Index) has come down over the past few years as CPI was 6.4% in January 2023, 3.1% in January 2024, and 2.4% in May 2025 (the most recent reading). The path of inflation continues to be on the right path (towards the 2% target), but there is still uncertainty as tariffs could result in higher prices in the months ahead. However, the timing and magnitude of higher prices is very uncertain as trade deals are still being negotiated and tariffs continue to change as a result.
Tariffs
As we mentioned above, the primary catalyst that drove financial markets lower (and higher) was the uncertainty surrounding tariffs. The uncertainty was the result of major changes to tariffs within days, hours, and minutes. Often times, tariffs were increased, decreased, selectively exempted, or pulled back over short periods of time. This fluid tariff situation peaked with Liberation Day, and the resulting “Tariff Tantrum” in early April. Financial markets moved sharply lower, then moved sharply higher within five weeks. Currently, there appears to be less tariff uncertainty and a narrower range of outcomes for tariffs compared to the start of the year.
The natural concern over tariffs is it could result in higher costs, higher inflation, and slower economic growth. Thus far, the impact of the Tariff Tantrum has negatively impacted investor sentiment and “soft data” (outlook surveys, consumer confidence, expectations). However, the Tariff Tantrum has not yet had a material impact on actual hard data (measurable data such as GDP, CPI, employment data).
Interest Rates
There has been no change to the short-term interest rate the Fed sets since December 2024. Currently, the short-term interest rate is set at 4.25-4.50%. The Fed continues to monitor inflation data, employment data, and the health of the U.S. economy to determine when to cut interest rates. This is to support the Fed’s dual mandate of (1) price stability and (2) maximum employment. As the economy is moving out of a high inflationary period, the possibility of an interest rate cut grows. The current expectation is there will be two interest rate cuts in 2025.
The Chairman of the Federal Reserve Bank, Jerome Powell, will have his term expire as Chair in May 2026. President Trump will likely nominate someone who has a “dovish” approach to interest rates. A dovish approach is a person that has a preference to lower interest rates to help the economy. We will continue to monitor this situation as the potential for a material cut in short-term interest rates could develop next year.
U.S. Economy
So far, the U.S. economy has proven to be innovative, efficient, and resilient. There are several ways to measure the health of the U.S. economy, but we’ll focus on two key data points, (1) economic growth, or GDP, and (2) corporate earnings.
Gross Domestic Product (GDP) is the aggregate of all goods and service produced in the economy. The most recent GDP data showed a slight slowdown, largely due to the negative impact from a surge of imports, as companies were rushing to import goods before any tariffs were placed on those goods. Further, most economists expect the U.S. economy to grow between 1.4% to 1.6% in 2025. Corporate profits for the 1Q 2025 were overall good (not great) despite the uncertainty around tariffs. Specifically, for the 1Q 2025, 77% of companies in the S&P 500 reported earnings that exceeded estimates. Overall, companies in the S&P 500 had earnings growth of 12.9%. However, some companies did provide cautious guidance going forward. The key takeaway is the U.S. economy is expected to grow in 2025, albeit at a slower rate. Also, corporations were generally able to manage through tariff uncertainty and generate decent profits during the 1Q 2025.
Summary
The first 6 months of the year we were reminded that short-term volatility continues to be a part of investing. Inflation is higher than the 2% target, but trending in the right direction. Corporate profits were good (not great) as companies managed through the Tariff Tantrum. The stock market had a bumpy ride that resulted in slightly positive returns for the first six months of the year. Interest rates remain high, but expectations for two interest rate cuts in 2025 and potentially more in 2026.
For the rest of 2025 we anticipate more progress on the pro-growth administrative agenda, solid earnings growth for corporations, potential interest rate cuts, and reduced recession odds. However, that is also balanced with elevated concerns due to continued policy uncertainty, U.S. economic growth concerns, geopolitical risk, and AI skepticism.
At Landing Point Financial Group, we continue to monitor the economy and financial markets to make sure client portfolios are positioned to help clients meet their goals. We hope you have a healthy and prosperous 2025!
Please reach out to your advisor if you have any questions.
Disclosure: The opinions and views expressed by the author are personal and based on economic or market conditions at the time of publication. Actual economic or market events may turn out differently than anticipated. Nothing in this material is intended to serve as personalized investment, tax, or insurance advice.