Latest / Paramount Wealth Perspectives / Global Tug-of-War: AI, Tariffs, and Tactical Investing in an Uncertain Economy - 7/14/25

Transcript

Global Tug-of-War: AI, Tariffs, and Tactical Investing in an Uncertain Economy - 7/14/25 · Paramount Wealth Perspectives

• 0:00
  Chris Coyle: Intro song
• 0:12
  Hello everyone.
• 0:12
  Welcome to Paramount Wealth Perspectives, your go-to podcast for the latest updates on global markets and current economic events.
• 0:20
  This is your host, Chris Coyle.
• 0:22
  I'm the marketing director and a financial advisor here at Paramount Associates Wealth Management.
• 0:27
  And today I'm joined by Scott Tremlett, chief Investment Officer here at Paramount Associates Wealth Management.
• 0:33
  Today I've prepared several questions that I'm excited to hear Scott's answers and opinions to.
• 0:38
  Let's begin with artificial intelligence.
• 0:40
  Artificial intelligence remains a dominant theme.
• 0:44
  What are the most important developments investors should track right now?
• 0:48
  Absolutely.
• 0:49
  Chris, A dominant theme, and I am watching three major shifts in ai.
• 0:54
  First.
• 0:55
  Companies are focusing on connecting all of their data.
• 0:58
  Things like sales numbers, customer calls and documents, all into one system.
• 1:04
  This makes it easier to automate tasks and get clear insights across their business.
• 1:09
  Second geopolitical tensions are feeling demand for what would be called sovereign.
• 1:14
  Clouds.
• 1:16
  A sovereign cloud is a cloud computing system that ensures all data is stored, processed, and managed within a specific country's borders and legal jurisdiction complying with local data, privacy, security, and regulatory requirements.
• 1:32
  Enterprises want to ensure data sovereignty, and this is shifting infrastructure from global to regional, especially across Europe and Asia.
• 1:42
  Finally, efficiency matters more than.
• 1:44
  Ever we're seeing a pivot away from giant AI models to leaner, specialized, more efficient ai, which is seen as lower cost, more scalable, and even greener.
• 1:56
  These developments position AI as an engine for long-term growth and productivity and not just a novelty.
• 2:03
  Absolutely.
• 2:03
  I couldn't agree more, Scott.
• 2:05
  Those shifts are spot on.
• 2:06
  The push toward unified intelligence and sovereign cloud solutions is transforming how businesses think about and control compliance.
• 2:15
  I love, and I love your point on moving toward more efficient specialized ai.
• 2:19
  It's exactly where long-term value and sustainability intersect.
• 2:24
  Now, let's turn to the markets Inflation, tariffs, rate cuts.
• 2:28
  There's a lot swirling.
• 2:30
  What should investors focus on?
• 2:32
  Well, it's really a tug of war right now.
• 2:34
  On one side, we've got new tariffs pushing input costs higher, particularly in key commodities like copper.
• 2:41
  On the other, we're seeing resilient economic data, strong jobless claims, improving consumer metrics, and the new big, beautiful bill.
• 2:50
  Which may reduce corporate tax rates to 12% and potentially boost GDP into 2026.
• 2:57
  The consumer price index or CPI is front and center.
• 3:01
  The June print is expected at 2.6% year over year.
• 3:06
  Slightly up from May, and if this is confirmed, that would be the highest since February and market consecutive, consecutive monthly rise.
• 3:14
  That announcement for all that are listening is coming to us tomorrow.
• 3:19
  Yet markets are not yet pricing in the full impact of these tariff headwinds.
• 3:25
  But inflation swaps or contracts where two parties exchanged payments linked to the consumer price index are telling us that investors are expecting CPI to potentially rise as high as 3.3% by next summer.
• 3:39
  Over the last few days, we have also heard new tariffs.
• 3:43
  New news on tariffs with Canada, Brazil, and other countries in the crosshairs of the administration.
• 3:49
  We'll see if these lead to negotiations or actually become reality in the coming weeks.
• 3:55
  And don't forget about earning season.
• 3:58
  Which is opening this week, and analysts are forecasting second quarter earnings for all s and p 500 companies to rise by an average about 4.8% overall.
• 4:08
  If that does turn out to be the actual rate, it would be the slowest earnings growth since the fourth quarter of 2023.
• 4:16
  We'll see if earnings growth does slow to this level or if it proves to be a low bar to beat, and markets actually rally by beating expectations.
• 4:27
  Yeah, it really does feel like a tug of war between macro pressure and market optimism.
• 4:33
  Tariffs and rising CPI expectations are definitely creating headwinds, but strong economic data and the potential for tax reform are keeping sentiment afloat.
• 4:43
  Like you said, earning season could be that swing factor that either confirms the slowdown or surprises to the upside.
• 4:51
  So how's the equity market absorbing these signals?
• 4:55
  Any rotations or tactical shifts?
• 4:58
  Definitely some rotations.
• 4:59
  Uh, last week, small cap value stocks and defensive sectors like energy, utilities, and industrials led performance.
• 5:08
  While growth and momentum took a breather for the week, what I'm seeing is a shift towards quality, value, and defensive equity sectors.
• 5:18
  As earning season kicks off, fundamentals are beginning to matter again.
• 5:23
  In fact, five of the 11 s and p 500 sectors are actually expected to show negative earnings growth in the second quarter, i'm also watching the momentum factor fade.
• 5:35
  It's still the top performer year to date, but the recent volatility suggests investors may take profits and stocks that have outrun their fundamentals.
• 5:45
  Yeah, absolutely.
• 5:46
  The pivot toward quality and value is becoming more evident, especially as fundamentals start to retake the spotlight.
• 5:54
  With defensive sectors stepping up and momentum showing signs of fatigue, it's clear that investors are recalibrating ahead of what could be a pivotal earning season.
• 6:05
  So what's the global picture?
• 6:07
  Any signals from international markets that should guide our thinking.
• 6:11
  Yes, and some are actually quite positive.
• 6:14
  The Eurozone s Cix Confidence Index surge just surged to a two year high and Eurozone.
• 6:21
  Economic data continues to beat expectations.
• 6:25
  China's inflation remains subdued.
• 6:27
  CPI at 0.1% and.
• 6:30
  PPI or the producer inflation is actually down 3.6% year over year, but that opens the door for further stimulus in China, which could support emerging market assets.
• 6:43
  Despite the tariff concerns, the US dollar has stabilized after a tough first half, clawing back 1% so far in July.
• 6:51
  That matters, especially for international equities, which have had a strong run, particularly the MSCI.
• 6:58
  EFA Index, even though its earnings growth, expectations are modest.
• 7:03
  At best.
• 7:04
  I concur.
• 7:05
  There are some encouraging signs globally, the boost in Eurozone sentiment and China's potential for added stimulus give international markets a tailwind.
• 7:15
  And with the dollar stabilizing it creates a more favorable backdrop for overseas, uh, equities, even if earnings expectations remain modest.
• 7:24
  Okay.
• 7:25
  Final thought.
• 7:26
  How should our clients position portfolios right now?
• 7:30
  I am emphasizing balance, flexibility, and quality in equities.
• 7:36
  I favor companies with strong pricing power.
• 7:38
  Cash flow, visibility and margin protection.
• 7:42
  Think infrastructure, cybersecurity, and selective healthcare, and I'm overweight internationally as stronger momentum supportive central banks and lower valuations.
• 7:54
  Make a compelling case for outperformance to continue on the fixed income side.
• 8:00
  Intermediate duration, municipals and corporates are becoming more attractive with the 10 year treasury yielding now over 4.4%.
• 8:09
  I'm still using infrastructure investments in lieu of bonds in many cases, but there will be a time when the Fed will help interest rates to come down.
• 8:17
  And in turn, create opportunities for bounds to perform well in alternatives.
• 8:22
  Like I said, infrastructure, private equity and private credit are performing well with limited downside volatility and don't ignore cash with short-term rates still elevated money markets remain smart, plays for liquidity management.
• 8:39
  It's momentum that rewards.
• 8:41
  Active risk management.
• 8:44
  Resilience is strong, but policy signals are mixed.
• 8:47
  That's why real time data-driven decisions matter more than ever.
• 8:53
  No question.
• 8:54
  That's a smart framework for navigating this kind of market, emphasizing quality in equities, staying nimble in fixed income, and leveraging alternatives like infrastructure and private credit.
• 9:05
  It offers the kind of diversification and downside protection that's absolutely critical when policy direction is uncertain.
• 9:14
  Well, thank you, Scott, for taking the time to share your thoughts.
• 9:17
  Thank you to our audience for tuning in, and please remember, if you have a question you would like to hear our opinion on, please submit them to general@paramountassoc.com.
• 9:29
  For now, stay informed.
• 9:31
  Stay ahead.
• 9:32
  And join us next time for more key updates shaping the global economy.