Despite pessimistic economic indicators, the S&P 500's surprising resilience challenges perceptions of impending recession among analysts and investors.
Tariffs are significantly impacting small businesses and manufacturing, threatening holiday orders and creating potential supply shortages in the market.
The conversation highlights the government's lack of clear objectives in tariff negotiations, leaving small businesses feeling isolated and uncertain about the future.
Deep dives
Event Announcements and Economic Outlook
The podcast begins with reminders about upcoming events in Chicago and Nashville, highlighting potential ticket sell-outs. The discussion quickly shifts to the economic landscape, with mention of Goldman Sachs projecting the U.S. will experience the lowest growth and highest inflation among developed economies in 2025. There is a notable contradiction between pessimistic economic indicators, like survey data reflecting consumer and business gloom comparable to past crises, and the S&P 500 maintaining relative stability in the market. This disconnect raises questions about market behavior and investor psychology amidst declining economic sentiment.
Market Behavior and Gloom
Despite widespread pessimism reflected in consumer and business surveys, the market shows surprising resilience, posing a challenge for analysts to reconcile. A significant drop in survey data, particularly from manufacturers citing tariffs as a concern, seems to predict an impending recession, yet the actual market performance doesn’t correspond with these bleak forecasts. The discussion explores how individual investors, trained to 'buy the dip,' may be propping up the market while institutional investors exhibit nervousness. This phenomenon leaves both analysts and investors puzzled about the future trajectory of the market.
Tariffs and Economic Realities
The conversation shifts to the implications of tariffs on American industries, especially small businesses that cannot absorb the increased costs. There is a critical examination of how tariffs are affecting holiday orders, implying that manufacturers will struggle to meet consumer demands as they face higher import fees. Even if there were a policy reversal on tariffs, the disruption in supply chains could still result in empty shelves and decreased product variety during critical sales periods. This situation underscores the precarious balance between retail and manufacturing sectors in a shifting economic landscape.
Negotiations and Government Response
The discussion also covers the complexity of tariff negotiations and the government's response, particularly Secretary Scott Bessant's calming influence amidst market panics. Analysts express skepticism over the efficacy of negotiations with China in light of shifting tariffs that could destabilize supply chains. There is a broader concern about the administration's level of engagement with industry stakeholders, as small businesses feel increasingly isolated from the conversation. The lack of clear objectives and success metrics regarding tariffs complicates the economic outlook further.
Broader Implications of Economic Policy
Lastly, the potential societal impacts of continued economic strain are discussed, focusing on material shortages and layoffs that could exacerbate discontent. Historical comparisons illustrate how past economic crises reveal the limitations of macroeconomic policies in resolving supply shocks. A worrying scenario emerges where insufficient domestic capacity to meet consumer needs aligns with rising unemployment, creating a vicious cycle of economic instability. This bleak outlook emphasizes the need for clear policy objectives and effective governance to navigate the highlighted economic challenges.
The markets may be hanging in there but they also held strong in early 2020—right up until Covid hit New York. Meanwhile, tariffs are driving consumer confidence down, firms are talking about cutting back on hiring and investments, and Goldman Sachs is predicting that the U.S. will have the highest inflation and lowest growth of any developed economy this year. Plus, Scott Bessent is not a calming influence, and Trump has a real 'War on Christmas' in the works.
The Stalwart Joe Weisenthal joins Tim Miller. show notes
