Consternation – Correction - Continuation

Here we find ourselves, past the Ides of March and zooming into a completion of the first quarter of 2025, and I feel that it is necessary to address the current doom and gloom. I know I tend to seek out the better side of things in most scenarios, but I also try to keep my “glass half full” bias in check. While I’m not an alarmist when it comes to prophesying doom, I am quite at home amidst gloom. Last week we were warned of an inclement weather event headed our way over the weekend, with powerful thunderstorms and wind gusts. I know other places had a harsher storm than us, but I found myself happily strolling Main Street with coffee and an umbrella. I love the rain, especially in the morning when it keeps the world dimmer than usual. I perceive those stormy, gloomy morning shrouds as sheltering our protected lives at home and enhancing our rest and dreams.
 
I know the news has been upsetting, and we are now seeing and hearing the words correction, recession, inflation, and bear more than we would wish. It is uncomfortable to say the least, but even more so amidst the overwhelmingly negative political news. Our leaders should be combatting fear, not stoking fires, but both sides seem ready to use any fear that is handy as a weapon to sully the other side. Unfortunately, this seems to be the new normal in the political realm.

Last week the S&P 500 had a correction, falling 10% from its last high point on February 19th. The Nasdaq corrected the week before, and various growth stock, small-cap, and mid-cap indexes have fallen further. Almost all the headlines lately are saying the uncertainty created by the current administration’s flurry of policy changes will lead to higher inflation and a recession. I will not contest that tariffs are bad for economic growth, nor that uncertainty is bad for business planning and investor confidence. Neither will I say that anyone can predict with certainty future targets of broad economic forces such as inflation, domestic and global GDP, or capital markets around the world. Especially based on singular inputs into the overall equation.
 
The inundation of negative news, however, is bad for a lot of things. It is obviously bad for investor sentiment. All of us feel it, and that can grow on itself… worry begetting selling, begetting more worry, etc. Likewise, consumers and businesses may spend less, which decreases economic output. However, I only bring this up to highlight that the fundamentals of our economy, our banking system, business investment, and consumers are not currently weak. While we can’t discount the effect of emotions on things, we should not be fearful that great structural weakness exists today, because it does not.
 
Finally, regardless of which side of the fence you are on, no one is talking about anything good coming from all these changes. Maybe nothing good will come from it, and we will just swing sides again next election and start the whole process anew. But, despite who we believe is at fault for leading us to where we are today, it is hard to argue that lower taxes, less regulation, and less bureaucracy are not better for economic growth, or that less fiscal stimulus and quantitative easing is ultimately better both for transparency in investing and for faith in the credit worthiness of our country and its future.
 
We all know change is uncomfortable, but none of us know the future. The possibility of good future outcomes are just as likely as the negative ones the media is currently giving us. Corrections, recessions, and political fighting are just a part of business as usual, while the normal path of economies and markets are directionally upward. The basic human principle, that we make our futures better, is not being tested today.
 
Justin Anderson