Confusion is the Enemy

March 17, 2025

Financial Markets

This past week continued the theme of uncertainty that has persisted since the beginning of the year. Financial markets are always subject to speculation and volatility, but the extent of the confusion seen recently is unusual. All three major U.S. equity indices lost ground throughout the week, only seeing some relief on Friday. Surprisingly, markets had a tepid response to Wednesday’s better-than-expected Consumer Price Index (CPI) report, which showed year-over-year inflation at 2.8% versus the expected 2.9%.

Investor sentiment remains vulnerable to speculation and shifting narratives. To understand the pressures facing markets, we must examine economic fundamentals and the broader political environment.

Economics

The U.S. remains the strongest economy among developed nations, with resilient employment, steady corporate earnings, and a strong U.S. dollar. Inflation has moderated, and employment remains stable, supporting an overall solid economic backdrop.

However, policy uncertainty continues to weigh on the confidence of investors and company management teams. The new administration has started a trade war by introducing a range of aggressive trade policies that involve imposing tariffs on rivals and key allies alike. Potentially in jest, President Trump has also suggested that he will convert a war-torn Gaza from a destroyed desert country into a grand vacation destination.

At home, the president has proposed a highly ambitious agenda—reducing tax rates while balancing the budget, deporting millions of foreign workers without disrupting wages or inflation, and drastically cutting the size of the government.

While new administrations often set ambitious policy goals, some initiatives—particularly in trade and immigration—have raised concerns among economists about potential negative consequences for the U.S. and global economies.

Conclusion

While all administrations make promises they may not fully deliver on, the current one appears committed to certain policies that many economists believe could have adverse effects. Despite these uncertainties, the U.S. economy remains strong by most measures. Businesses and investors must closely watch financial markets, economic data, and government policy decisions, as the coming months could bring further volatility.  We and other credible and thoughtful investment professionals believe that the risk of recession has increased as an unintended consequence of the policy changes and related uncertainty.  We will continue to monitor markets and data for early warning signs.

While unsettling, market corrections are a normal and healthy part of the investment cycle. Investors should remain disciplined and avoid making impulsive decisions based on short-term volatility.

For more information on the current market environment, we direct readers to the Investment Update published last Friday. We will release our more in-depth quarterly Investment Review & Outlook in early April.

I. Front End Disclosure

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of 1919 Investment Counsel, LLC (“1919”). This material contains statements of opinion and belief. Any views expressed herein are those of 1919 as of the date indicated, are based on information available to 1919 as of such date, and are subject to change, without notice, based on market and other conditions. There is no guarantee that the trends discussed herein will continue, or that forward-looking statements and forecasts will
materialize.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all clients and each client should consider their ability to invest for the long term, especially during periods of downturn in the market. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those shown.

All investments carry a degree of risk and there is no guarantee that investment objectives will be achieved.

This material has not been reviewed or endorsed by regulatory agencies. Third party information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

There is no guarantee that employees named herein will remain employed by 1919 for the duration of any investment advisory services arrangement.

1919 Investment Counsel, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission. 1919 Investment Counsel, LLC, a subsidiary of Stifel Financial Corp., is a trademark in the United States. 1919 Investment Counsel, LLC, One South Street, Suite 2500, Baltimore, MD 21202. ©2025, 1919 Investment Counsel, LLC. MM-00001672

II. Investment Analysis

The information shown herein is for illustrative purposes. 1919 may consider additional factors not listed here or consider some, but not all, of the factors listed here as appropriate for the strategy’s objectives.

There is no guarantee that desired objectives will be achieved. 1919 has a reasonable belief that any third party information used for investment analyses purposes is reliable but does not represent to the complete accuracy of such information by any third party.

III. Portfolio Composition

For illustrative purposes. There is no guarantee that the portfolio composition for the strategy discussed herein will be comparable to the portfolio shown here.