Thoughts from the Frontline

Good news: Tariffs will not make the world end. American businesses will do what they do best, which is adapt. While the probability of a recession has increased, we always get through it and the best businesses thrive. Unless directly affected by tariffs, don’t change your personal plans that much. Much of this may change over the next few weeks or months, for reasons I outline below.

Financial market news has seemingly become all tariffs, all the time. The president’s plan, whatever it is, seems to spring from his belief that trade deficits are bad and must be eliminated. Tariffs are just a means to that end.

The theme among so many writers seems to be “vibe shift.” And indeed, there is a concern the economy is slowing and may even be in a recession. That is certainly what today’s writer and my friend, Danielle DiMartino Booth, points to in this second part of her data-driven inflation analysis, which I share below. She believes the mainstream media, both financial and otherwise, is missing the fact that inflation is going to come down faster than most analysts expect—including those at the Federal Reserve.

Last week we published a chart of the Atlanta Fed’s GDPNow model, which had just dropped sharply to a -2.4% real GDP growth forecast for the first quarter of 2025. This model can be volatile. Its latest big swing was mostly an artifact of spiking gold imports. Economic growth prospects do seem to have dimmed considerably, though.

“Stock prices have reached what looks like a permanently high plateau.” —Yale economist Irving Fisher 12 days before Black Monday in October 1929

Bull’s Eye Investing was published on January 1, 2004. It quickly became a bestseller. The main thing that people still ask me about was a trifold spread color chart of stock market returns since 1900. Returns were color-coded so readers could see the ebb and flow of returns over time. That remarkable representation of market performance was created by Ed Easterling of Crestmont Research. Ed and I shared a very nerdy, wonkish fascination with markets and trends. We spent a great deal of time together in that pursuit.

Last week we began discussing the import tariffs President Trump has been threatening. Most (China is the exception) have not taken effect yet. It’s possible they will never happen or will be quickly modified or rescinded as happened in Trump’s first term.

I think I’m going to start a new 12-step program. I sense there are a lot of potential members. The meetings would start with something like this:  “Hi. My name is John. I have Trump Confusion Syndrome. I don’t think it’s contagious, but many of my friends are suffering similar symptoms.

Today we’ll talk about Trump, tariffs, cycles, and DOGE. Jumping right in…

“There are decades when nothing happens, and weeks when decades happen,” says a quote from Vladimir Lenin, who may have copied it from someone else. Regardless of origin, it is true and will be even more true as technology and even government changes faster. We may have just lived through such a week for the financial markets—and maybe for the whole global economy.

The Second Trump Era has begun. If you are confident about what it will bring (either good or bad), I would like to gently suggest you reconsider. None of us should be sure what is coming. We can only know what we want. For a variety of reasons, we may or may not get it, not least of which is that we want a variety of things that may not overlap with what our fellow citizens want.

Rain can be either refreshing or destructive. It can make plants grow or produce devastating floods. But in all cases, it’s largely outside human control. Or is it?