By Michael Brodt
Quarter 1, 2025
During a radio address on his hundredth day in office, on June 12, 1933, our 32nd President, Franklin D. Roosevelt, coined the term “First 100 Days.” Since then, the first 100 days of a presidential term are closely watched and widely talked about. We typically see a flurry of activity during these first 100 days; these first 100 days have proven to be active indeed.
The early part of President Trump’s second term has been largely dominated by talk of tariffs, resulting in a highly volatile stock market, desperate for answers on how potential trade wars might impact our U.S. economy. While the implementation of tariffs (and, in return, the retaliatory tariffs on U.S. goods) should not come as a surprise, the magnitude of the tariffs and the inconsistent message from Washington is certainly causing angst.
U.S. Federal Reserve Chair Jerome Powell recently said that tariff increases would likely result in a slowing of the U.S. economy and a delay in the progress being made toward lower inflation this year. However, he did say that the expectation would be that the tariff-related impact on the economy would be transitory and work its way through quickly.
After a series of interest rate cuts during 2024, the Fed left rates unchanged at both its 2025 Committee meetings, indicating that it is too early to tell the full impact of higher tariffs on inflation and economic growth. The Fed’s outlook for 2025 economic growth was adjusted to 1.7% from 2.1% and its outlook for inflation to 2.7% from 2.5%.
The first trading days of 2025 saw the Standard & Poor’s 500 Index (S&P 500) advance from 5,868 at the beginning of the year, to an all-time high of 6,144 on February 19. Following this apex, the S&P 500 hit correction territory, declining 10% to 5,521 on March 13. More recently, the index has shown strength, advancing just over 3% from this 2025 low.
While not enjoyable, stock market corrections occur on average every 1.8 years. The average recovery time is 4 months, and data shows that markets have ended higher a year after each correction since 1955. All indications are that this recent correction is nothing more than that—a correction within a market cycle and simply part of the ebb and flow of the stock market.
Both the U.S. economy and stock markets have proven resilient over the past five years. The economy, having avoided recession, recovered nicely from the 2020 Covid-19 Pandemic. The stock market not only recovered from the Pandemic, but also from the bear market of 2022, which saw the S&P 500 decline nearly 27% before recovering and ending the year down 18%. Just as before, we believe both economy and market will prove resilient again. Aided by a stable labor market and accommodative policy, the economy, while slowing, should continue to grow at a modest pace during 2025. Projections indicate that corporate earnings will remain solid; should this be the case, we can look forward to an improving stock market, especially as we move into the second half of the year.
As always, we value your relationship and the confidence you have in Adirondack Wealth Management by choosing us as your financial partner.