Politics or Economics

April 14, 2025

Financial Markets

Financial markets around the globe experienced another volatile week, primarily driven by the erratic and unpredictable behavior of the Trump administration on trade and tariff policy. The lack of clarity in official statements regarding who will be affected, what goods are included, when tariffs will be implemented, and where they apply has left investors in a state of confusion. This lack of clarity has made it challenging for market participants to plan effectively, and even seemingly prudent investment decisions risk being upended by sudden changes in policy.

The major U.S. equity indices continued their tumultuous swings, this time to the upside.

Economics

The global economic picture is mirroring the volatility seen in financial markets. At the start of the year, the U.S. economy appeared to be the strongest among developed nations. The dollar was strong, inflation seemed under control, and the Federal Reserve had begun lowering the Federal Funds Rate in a signal of confidence that inflation was contained.

Fast-forward to today, and the near-term outlook is less favorable. At least three different tariff proposals have been floated, nearly all of which are facing significant criticism from the broader economics community. Notably, several CEOs of major U.S. banks have warned of a potential recession by the end of the year. Meanwhile, the U.S. dollar has lost some of its relative strength.

A key concern is the administration’s inconsistency in trade negotiations. With multiple tariff scenarios being floated simultaneously, U.S. trading partners are unsure which proposal to respond to. This lack of direction sows confusion and could hinder global commerce and domestic economic stability. This confusion will be evident as companies report their earnings for the first quarter but will likely provide limited or no guidance for the remainder of the year.  Investors will accordingly be even more uncertain in forecasting corporate revenues, cash flows, and profits, leading to more conservative valuations.

Conclusion

The United States, long considered the leader of the global economic order, appears to be drifting away from that role. Financial markets are reacting accordingly, behaving erratically and often violently. This environment may persist in the near term, and traditional strategies like “buying the dip” may prove less effective in the short term amid such elevated uncertainty.

If market volatility continues and public confidence in the administration declines, especially among Republican voters, it’s possible that congressional support will weaken. In that case, the party may begin to distance itself from the President as it looks ahead to the rapidly approaching midterm elections.

Investors should brace for ongoing turbulence and avoid abandoning disciplined, long-term investment strategies. The practice of market timing can be frustrating and expensive.

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.

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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.