Financially Speaking
As I sit at my computer thinking about what to write for our first newsletter of 2025, a few old songs keep going through my head. Indulge me as I share them. I think they seem so apropos given the times. Perhaps you will as well.
“Oh, baby, baby, it’s a wild world. And it’s hard to get by just upon a smile. Oh, baby, baby, it’s a wild world.” Cat Stevens considered this a theme in his work about the sadness of leaving and the anticipation of what lies beyond. And, perhaps that describes how so many of us are feeling given the rapid fire changes made daily that impact our economy, the markets and ultimately our lives.
“What’s going on.” The Marvin Gaye song is just as relevant now as it was during the Vietnam War era. Many believe that Gaye was questioning the forces reshaping American culture. However, Obie Benson who wrote the song, did not see it as a protest song, but rather a song about love and understanding. Two things we could use more of.
Finally, the one song that plays on repeat in my mind, “Imagine” by John Lennon. Rolling Stone described the lyrics as “22 lines of graceful, plain-spoken faith in the power of a world, united in purpose, to repair and change itself.” As a mother, a grandmother, a sister and a friend, I couldn’t agree more.
In this quarter’s newsletter you will find an article by Sean on the Impact of Tariffs, a Market Commentary by Erik, our quarterly Economic & Market Update and information on upcoming Moore Afterhours Events.
The Long-Term Economic Impact of Trump’s Tariffs: Lessons from History and Today
By: Sean Moore, AIF® CFP®
At Moore Wealth, understanding the evolving landscape of trade policy is crucial for guiding clients through periods of economic uncertainty. The Trump administration’s recent escalation of tariffs – raising the average U.S. tariff rate to levels not seen since the early 20th century – has reignited debate about the long-term consequences of protectionism. Drawing on both current data and historical precedent, such as the enduring effects of the 1960s “chicken tax,” this article examines how today’s tariffs could shape the U.S. economy for decades to come.
Since January 2025, the U.S. has implemented sweeping tariffs on nearly all imports, with the trade-weighted average tariff surging from 2% to an estimated 24% – the highest in over a century. These measures include a 10% blanket tariff on all imports, 25% tariffs on steel, aluminum, and automobiles, and a staggering 145% effective tariff on most Chinese goods. Canada and Mexico, two of America’s largest trading partners, have also been targeted, though some exemptions exist for goods compliant with the USMCA.
The administration’s stated goals are to reduce the trade deficit, protect domestic industries, and address issues such as contraband and intellectual property theft. However, the economic consensus is clear: tariffs act as a tax on consumers and businesses, raising prices and disrupting global supply chains.
The immediate effects of these tariffs are already visible. Consumer prices have risen sharply, with the average household facing an estimated $3,800 annual loss in purchasing power due to higher costs for goods, especially clothing and textiles, which have seen price hikes of up to 17%.
The Penn Wharton Budget Model estimates that Trump’s tariffs could reduce GDP by about 8% and wages by 7% over the coming decades, with a typical middle-income household facing a $58,000 lifetime loss. These losses are more than double those from an equivalent increase in the corporate tax rate.
History offers a cautionary tale. The 1960s “Chicken Tax” – a 25% tariff on imported light trucks, in response to European tariffs on American poultry – was intended as a temporary measure but remains in place today. Its legacy has been profound: it reshaped the U.S. auto industry, limited consumer choice, and led to higher prices for decades. Once entrenched, tariffs can be politically difficult to unwind, creating long-term distortions in the economy.
Today’s tariffs risk repeating this pattern on a much larger scale. The complexity of global supply chains means that even industries not directly targeted by tariffs can suffer from higher input costs and retaliatory measures. For example, U.S. manufacturers reliant on imported steel and aluminum face higher production costs, making their products less competitive both at home and abroad.
The uncertainty surrounding trade policy is also weighing on financial markets. Key equity indices have declined, and the U.S. dollar has weakened since the announcement of the new tariffs. Businesses are delaying investment decisions, and consumer sentiment has deteriorated as households brace for higher prices and potential job losses.
Moreover, tariffs are unlikely to achieve their primary goal of reducing the trade deficit. Historical and contemporary analyses show that tariffs tend to reduce both imports and exports, often leaving the trade balance unchanged while shrinking the overall economy.
The Trump administration’s tariffs represent a seismic shift in U.S. trade policy, with far-reaching implications for the economy and financial markets. As history has shown, the effects of protectionism can linger for decades, reshaping industries and reducing economic growth. At Moore Wealth, we are focused on helping clients navigate this uncertain landscape by focusing on risk management, diversification, and long-term planning. The lesson from the “Chicken Tax” is clear: tariffs may be easy to impose, but their consequences are often lasting and profound.
A Market Update : The Year So Far
By: Erik Moore, AIF®
Q1 2025 Market and Economic Update: A Tentative Start to the Year
The first quarter of 2025 opened with modest gains in equity markets, supported by expectations for interest rate cuts and continued corporate earnings growth. However, signs of economic strain began to build by late March and have intensified into April, creating a more cautious tone for the second quarter. Market strength remains narrowly concentrated, while pressure on consumers and smaller businesses is becoming more visible.
Outperforming Asset Classes: Strength With Limits
Technology: Gains Continue, but Momentum Slows
Large-cap technology stocks remained a key driver of market performance, though the pace of gains has slowed. NVIDIA (NVDA) and Microsoft (MSFT) rose 12% and 8% respectively in Q1, but April trading has been more mixed. AI remains a major growth theme, yet elevated valuations, slowing enterprise IT budgets, and increased regulatory attention have raised questions about the sustainability of recent performance.
Financials: Early Tailwinds From Rate Expectations
Financial stocks outperformed early in the quarter on expectations of a rate cut by mid-year. JPMorgan Chase (JPM) and Bank of America (BAC) gained double digits as loan growth remained steady and credit quality stayed intact. However, April data on weaker loan demand and tightening credit standards suggest headwinds may be building, especially for regional banks.
Industrials: Capex Support, But Demand Is Uneven
Industrials posted solid Q1 results on the back of infrastructure spending and improved capital investment. Companies like Caterpillar (CAT) and Honeywell (HON) advanced 10–12%, supported by demand in energy and manufacturing. Still, new orders in some segments have softened in recent weeks, and margin pressure from wage costs remains a concern.
Underperforming Asset Classes: Structural and Rate-Driven Pressures
Utilities: Still Lagging as Rate Pressure Lingers
The utilities sector declined 4% in Q1 and remains under pressure. Higher debt costs and investor rotation away from defensives continue to weigh on performance. Even with potential rate cuts ahead, sentiment remains muted as April economic data has not yet given the Fed a clear path to pivot.
Consumer Staples: Pricing Power Wanes
Consumer staples struggled as input costs remained elevated and pricing power weakened. Procter & Gamble (PG) and Coca-Cola (KO) both fell modestly in Q1. Early April earnings calls have indicated that consumers are trading down, and inventory buildup at major retailers could impact near-term demand.
The “Magnificent 7”: Still in Control, but Cracks Are Forming
Mega-cap tech firms continued to dominate market returns, with the group responsible for over 40% of S&P 500 gains in Q1. But performance has started to diverge:
- Apple (AAPL) is down 5% year-to-date amid slowing iPhone sales and weaker China demand.
- Meta (META) rose 15% in Q1, but announced increased capital spending in April, which raised concerns about future margins.
- Tesla (TSLA) fell 7% in Q1 and is down further in April due to disappointing delivery numbers and margin compression.
While these firms remain central to index performance, their dominance also leaves markets exposed. April volatility in these names has shown how quickly sentiment can shift.
Economic Trends: Signs of Stress Under the Surface
Federal Reserve: Still on Hold
The Federal Reserve kept interest rates at 4.25% – 4.5% through Q1 and has signaled a wait-and-see approach. While market expectations continue to price in cuts later in 2025, April inflation data surprised to the upside, casting doubt on the timing. Fed officials have emphasized the need for sustained disinflation before moving rates lower.
Inflation: Progress Has Slowed
Headline inflation fell to 2.8% by March, but April’s data showed core prices rising more than expected, particularly in services. Rent, travel, and insurance costs remain sticky. This raises concerns that inflation may plateau above the Fed’s 2% target, complicating monetary policy decisions.
Labor Market and Consumer Health: Holding, but Slipping
Unemployment ticked up to 4.0% in early April, and job openings have declined for three straight months. Wage growth has slowed, and credit card delinquencies are rising—particularly among lower-income households. Consumer spending held up in Q1, but recent reports from retailers suggest growing pressure on discretionary categories.
Corporate Earnings: Solid for Large Caps, Uneven Elsewhere
S&P 500 earnings grew 6% year-over-year in Q1, largely driven by tech and financials. However, small- and mid-cap companies continue to struggle with input costs and financing challenges. Early April earnings pre-announcements have been more cautious, particularly in consumer goods and real estate-related industries.
Conclusion: A Market at a Crossroads
The first quarter of 2025 delivered moderate gains, but those gains came alongside growing signs of stress. Economic data in early April shows weakening in the labor market, persistent inflation in services, and strain on consumers. At the same time, market performance remains highly concentrated in a few large tech names, which increases risk if leadership falters.
With the Federal Reserve signaling patience, investors are recalibrating expectations for rate cuts. The path forward will likely depend on whether inflation resumes its downward trend and whether earnings strength can expand beyond a narrow group of companies.
As markets digest new economic data and company results, the focus will remain on fundamentals, valuation discipline, and diversification—particularly in an environment where both optimism and fragility exist.
Market Update — Quarter Ending March 31, 2025
Presented by Moore Wealth
Quick Hits
- Challenging Start to the Year for Stocks
A negative March for stocks capped off a weak first quarter. - Solid Quarter for Bonds
Falling interest rates supported bond prices. - Economic Update
First-quarter economic reports showed signs of solid growth. - Market Risks Worth Monitoring
Economic, domestic, and international risks remain for markets. - Cautiously Optimistic Outlook
The positive fundamentals should support markets.
Challenging Start to the Year for Stocks
It was a rough March for stocks, capping off a weak quarter to start the year. The S&P 500 lost 5.63 percent in March and 4.27 percent in the first quarter. The Dow Jones Industrial Average was down 4.06 percent during the month and 0.87 percent for the quarter. The Nasdaq Composite lagged its peers during the month and quarter, with an 8.14 percent loss in March and a 10.26 percent drop for the quarter. Technology and growth stocks experienced higher levels of volatility to start the year on concerns
surrounding AI and valuations.
Despite the poor performance, fundamental factors showed signs of improvement. Per Bloomberg Intelligence, as of March 31 with all companies having reported earnings, the average earnings growth rate for the S&P 500 in the fourth quarter was 14.3 percent. This is notably higher than analyst estimates at the start of earnings season for a more modest 7.3 percent increase. The better-than-expected earnings growth was widespread as each of the 11 sectors ended the quarter above analyst estimates. Over the long run, fundamentals have driven market performance, so the impressive earnings growth was a good sign for investors.
While fundamental factors were supportive for the quarter, technical factors were another story. All three major U.S. indices ended March below their respective 200-day moving averages. (The 200-day moving average is a widely monitored technical indicator as sustained breaks above or below this level can signal shifting investor sentiment for an index.) The drop below trend in March for each of these indices is worth monitoring given the previous technical support that each of these indices received throughout 2024 and the start of 2025. If we continue to see these indices remain below trend for several months, it could signal souring investor confidence in U.S. equities.
International stocks had a better start to the year, despite a mixed March. The MSCI EAFE Index fell 0.40 percent in March but still managed a 6.86 percent gain for the quarter. The MSCI Emerging Markets Index was up 0.67 percent in March and 3.01 percent for the quarter. Improving fundamentals and rising expectations for government spending and stimulus helped support international stock returns to start the year. Technical results were mixed for international stocks, as the MSCI EAFE Index ended the month above its 200-day moving average, while the MSCI Emerging Markets index fell below trend at the end of March.
Solid Quarter for Bonds
While equities had a largely negative start to the year, results were more encouraging for fixed income investors. Falling interest rates throughout the quarter led to rising bond prices and positive returns for most fixed income sectors. The 10-year U.S. Treasury yield fell from 4.58 percent at the end of 2024 to 4.23 percent at the end of March. The Bloomberg U.S. Aggregate Bond Index gained 0.04 percent for the month and a strong 2.78 percent for the quarter.
High-yield fixed income, which is typically less sensitive to changing interest rates, was a bit more mixed. The Bloomberg U.S. Corporate High Yield Index lost 1.02 percent in March yet managed a 1.00 percent return for the quarter. High-yield credit spreads started the year at 2.92 percent and ended March at 3.55 percent. Rising credit spreads are a sign that investors became more cautious during the quarter and required additional yield to invest in lower-credit quality bonds.
Solid Economic Environment for Now
The economic updates released throughout the quarter showed signs of solid economic growth to start the year. Hiring accelerated to end 2024 and that momentum has carried over into 2025. A healthy 151,000 jobs were added in February, and the unemployment rate remained relatively low at 4.1 percent. This continued job growth helped support personal income and spending growth, which rebounded in February after pulling back modestly in January.
Business spending was also supportive in the first quarter. Core durable goods orders, which are often viewed as a proxy for business investment, rose by 0.7 percent in February. This was well above economist estimates and indicates that businesses continued to invest to start the year despite the market turbulence.
While the hard data was largely positive in the first quarter, there are some signs of potential weakness ahead. Consumer confidence declined throughout the quarter, due in large part to rising political uncertainty and inflation expectations. Large drops in confidence have been associated with slower spending and economic growth in the future, so the notable decline in confidence to start the year is a risk that investors should monitor.
Figure 1: Conference Board Consumer Confidence March 2018–Present
Source: CB/Haver, as of March 25, 2025.
The Takeaway
- Economic growth continued throughout the quarter, with solid hiring growth leading the way.
- Consumer and business spending were healthy in February.
- Worsening consumer confidence to start the year is a potential risk to future spending and economic growth.
Market Risks Worth Monitoring
While a healthy economic backdrop and strong fundamentals were encouraging developments for long-term investors to start the year, the market volatility served as a reminder that real risks remain for investors. The falling consumer confidence throughout the quarter is a potential risk to the economic outlook given the importance of consumer spending on overall economic growth.
Asides from economic concerns, political uncertainty remains another large risk for markets. The planned rollout of tariffs continues to cause uncertainty and contributed to the rattled markets at the start of the year.
International risks remain as well, highlighted by the continued conflicts in Ukraine and the Middle East. And, as always, markets continue to face unknown risks that could pop up at any time. There’s certainly a lot for investors to keep an eye on. Given the real risks that markets face, it’s quite possible that we’ll see continued choppy returns in the months ahead.
The Takeaway
- Risks remain for markets, including economic and political risks.
- Domestic risks include a potential economic slowdown as well as high levels of political uncertainty.
- Unknown risks can also negatively impact markets and can’t be predicted.
Cautiously Optimistic Outlook
While it’s certainly important to acknowledge the current market risks, on balance we believe we remain in a relatively good place.
The economic backdrop remains largely supportive, powered by a resilient job market and decent spending in the first quarter. U.S. companies have shown an impressive ability to grow earnings, and analysts expect to see continued earnings growth in the quarters ahead. Despite the recent turbulence, it’s important to note that bouts of short-term volatility are normal when investing over the long term. While negative quarters can feel painful for investors at the time, over the long run, the outlook remains cautiously optimistic.
Ultimately, things are pretty good right now, but that may not always be the case. While continued economic growth and market appreciation remain the most likely path forward, we may face short-term setbacks along the way. Given the potential for short-term uncertainty, a well-diversified portfolio that matches investor goals with timelines remains the best path forward for most. If concerns remain, you should speak to your financial advisor about your financial plans.
Disclosure: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.
Moore After Hours
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