Latest / Paramount Wealth Perspectives / Tariffs, Inflation, and Market Resilience - 4/25/25

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Tariffs, Inflation, and Market Resilience - 4/25/25 · Paramount Wealth Perspectives

• 0:00
  Chris Coyle: Intro song
• 0:11
  Hello everyone.
• 0:12
  Welcome to Paramount Wealth Perspectives, your go-to podcast for the latest updates on global markets and current economic events.
• 0:19
  This is your host, Chris Coyle.
• 0:21
  I am the marketing director and financial advisor here at Paramount Associates Wealth Management, and I'm joined by Scott Tremlett, chief Investment Officer here at Paramount Associates Wealth Management.
• 0:33
  Today I've prepared some questions reflecting on points in the last episode, as well as a few other ones I believe to be extremely relevant at this time.
• 0:42
  So now let's begin.
• 0:45
  Last time you spoke about the unexpected magnitude of the tariff announcements and how they came at a fragile moment economically.
• 0:52
  Since then, Scott, what's changed on the tariff front and is the overall outlook improving?
• 0:59
  Thanks, Chris.
• 1:00
  Well game on.
• 1:01
  Absolutely.
• 1:02
  The outlook is improving.
• 1:04
  What we've seen is a significant divergence from what could have happened originally, if nothing changed, we were looking at a 38% average effective tariff, and that would've been incredibly disruptive.
• 1:16
  But with pauses and negotiations kicking in, the actual rate is now closer to 18%.
• 1:22
  The US and the European Union have agreed to a 90 day pause on many of the new tariffs.
• 1:27
  The EU is proposing a zero for zero industrial tariff deal.
• 1:31
  Sounds great, but the US wants major commitments in return, like a$350 billion energy purchase.
• 1:39
  China, on the other hand, is an outlier.
• 1:42
  The US raised tariffs to 145% on Chinese goods, and China responded with 125% on US exports.
• 1:50
  While there's been easing on specific items like semiconductors, this really essentially a halts.
• 1:56
  Bilateral trade between the two countries.
• 1:59
  That said, countries like Japan, India, and Canada are moving quickly in talks, and South Korea may actually ink a deal as soon as next week.
• 2:08
  So we're getting signs of progress, but it's not locked in yet.
• 2:12
  So yes, there have been improvements in the outlook.
• 2:15
  That's good to hear that there have been improvements in the outlook.
• 2:18
  I certainly know the markets have appreciated the overall negotiations.
• 2:23
  Next question I want to ask you about Scott is inflation.
• 2:27
  Inflation fears really spiked after the announcements I.
• 2:31
  What's the picture now and what has it done to the Fed rate?
• 2:35
  Cut expectations?
• 2:36
  Yes.
• 2:37
  Inflation expectations did initially jump.
• 2:40
  We saw consumer inflation forecast really spike, but since they've cooled down, the Fed is now expecting CPI to end the year around 2.7%, up from the current 2.4%, and other estimates I see are hovering between 2.5 and 2.8%.
• 2:57
  Still.
• 2:58
  However, the consumer expectations are sky high.
• 3:02
  People see inflation at 6.5% in the next year, which would be the highest since 1981.
• 3:09
  That fear pushed the 10 year yield up to 4.5%.
• 3:13
  Before it stabilized.
• 3:15
  As for the Fed markets are still pricing in three rate cuts this year, but officials have been cautious.
• 3:22
  They're saying it's too early to make the call until the full impact of the tariffs play out.
• 3:27
  I appreciate the insights, Scott, and the, the data that you provided sounds like there's quite the discrepancy between the Fed expectations and consumer expectations.
• 3:37
  Next question, Scott, is what about the bond market?
• 3:40
  Have we seen the foreign selling?
• 3:41
  You warned against That was a fear.
• 3:44
  Yes.
• 3:45
  But despite the noise, we haven't seen China sell us treasuries.
• 3:49
  In fact, foreign investors increased purchases by 22% in April compared to March.
• 3:55
  There was a brief stretch in early April where foreigners sold treasuries, eight out of 11 trading days.
• 4:02
  This was largely driven by Japanese private investors, but the biggest reductions actually came from investment advisors and not central banks.
• 4:11
  So the weaponized treasury selling fear hasn't materialized to this point.
• 4:16
  It's good to hear that it hasn't materialized.
• 4:19
  Um, certainly will keep an eye on that and I'll continue to ask you questions about that, Scott.
• 4:25
  Next question is there was a lot of concern about these tariffs that they could tip us into.
• 4:30
  A recession has that narrative held.
• 4:34
  Great question.
• 4:35
  Initially, yes, recession risk surged markets dropped hard.
• 4:41
  The s and p fell nearly 13% in just four days.
• 4:44
  The steepest dropped since the beginning of Covid.
• 4:47
  European markets dropped over 8%.
• 4:51
  Indian China, they saw hits to.
• 4:53
  But since then, there's been a rebound.
• 4:56
  The s and p is up nearly 10% from the bottom.
• 4:59
  Those still below the February peak, the forward price to earnings ratio dropped to 19 times earnings and has since climbed back to 20 times.
• 5:09
  More importantly, the messaging outta DC suggests they're actively avoiding recession territory.
• 5:15
  Some tariffs are being rolled back and deal making is ramping up all signs.
• 5:20
  They wanna keep this expansion going.
• 5:23
  Thanks Scott.
• 5:24
  You make some good points about the market's overall resilience and I would have to agree that the recent negotiations out of DC suggest they are actively trying to avoid a recession as well.
• 5:36
  Another component of a recession is unemployment and the recent continuing jobless claims have continued to decrease throughout the month showing stabilization.
• 5:46
  Last point I want to touch on Scott is positioning.
• 5:50
  You said stay structured last time.
• 5:53
  Has there been any changes to your outlook or your portfolio strategy since then?
• 5:58
  Yes, I have made a few important updates.
• 6:01
  I've lowered my s and p 500 year-end target from 6,175 to 63 50 to a more conservative 5,500 to 5,800.
• 6:11
  So I'm really looking away from US stocks and towards.
• 6:14
  Other types of assets or regions to drive performance in 2025.
• 6:19
  After the initial tariff announcement, I did move away from some high beta US stock positioning, and I bought a bunch of gold.
• 6:27
  I took profits on my gold positions and rotated into infrastructure and cybersecurity tech themes tied more to reshoring defense.
• 6:36
  In a more digital economic system, I've cut all public bond exposure except for some short term treasuries.
• 6:45
  And my foreign stock overweight, which I've held for a while, has helped offset losses in US equities.
• 6:51
  I plan to maintain and even increase that exposure in the future.
• 6:56
  So yes, still structured, but more tactical in response to where policy winds are blowing.
• 7:02
  Thanks for your sharing those insights, Scott.
• 7:03
  Sounds like you've been quite nimble.
• 7:05
  Certainly the international exposure that you've been holding has paid off and sounds like you've been, again, quite nimble within the US markets.
• 7:14
  So I, I really do appreciate you taking the time to share your insight.
• 7:18
  Scott, I also want to thank all of our listeners for tuning in.
• 7:22
  Remember, if you have a question that you would like us to answer, please submit them via email to general@paramountassoc.com.
• 7:33
  But for now, stay informed.
• 7:35
  Stay ahead and join us next time for more key updates shaping the global economy.