By Jeremy Bryan
Markets are facing a season of change in how Washington manages trade policy with other countries and how that change will influence future consumer spending and business growth.
First, regarding trade, the perceived threat of tariffs has transitioned from threat to reality. This is disrupting several industries, including autos, semiconductors, and consumer goods. Tariffs are nothing new for the United States, but the widespread nature and magnitude of tariffs have not been seen for many, many years. It seems the season of tariffs is upon us, but the impact and countereffects of their implementation is creating a high degree of market uncertainty about the future.
Second, we have been living in a season of very low unemployment rates. Based on Federal Reserve data, the median United States unemployment rate from 1980 to 2022 was 5.80%. Since 2022, after COVID job loss had subsided and we re-engaged as consumers, the median unemployment rate is 3.70%, well below the long-term average.
Humans tend to grow accustomed to their recent surroundings. We have long said that jobs, and job sentiment, were the primary factor of our continued resilience as consumers and a driver of our strong economic growth. If jobs were to revert closer to long-term average unemployment rates, we would have concerns about the consumer and their ability to spend. Already, there is some evidence that federal employee uncertainty and tariffs are having a negative influence on consumer spending trends. As of now, there is no concrete evidence of significant job loss outside Washington, D.C., but this is something we will be monitoring closely.
The end of March also brings the season of company earnings reports. These reports will be scrutinized as they will be the first reports since the implementation of tariffs was a real factor. While the absolute numbers and levels of reported growth are important, it is just as important to hear management teams discussing the cost of uncertainties from tariffs and how they plan to adjust business plans as a result. Business leaders can no longer consider tariffs as only a negotiation tactic, so how they deal with these changes and their effects on future growth will be a big factor in future market performance.
With markets and life, the only real certainty is change. Any investment plan should be adaptable to changing environments or adjusted goals or risk tolerances. With investments, change is often unpredictable and is a core reason to diversify with elements of protection but also assets to achieve long-term growth. Our theme for 2025 was “bring an umbrella” and the central reason for bringing an umbrella is to be prepared for change, not predicting exactly when the change will occur.
In closing, there is a season of change happening at Gradient Investments. After eight wonderful years, my time as Senior Portfolio Manager is coming to an end. This has been a terrific place to work, and I appreciate everyone that has read or listened to anything I wrote or communicated over the years. Markets are rarely easy and are often confusing. My goal was to bring some level of clarity rather than increase confusion. I hope I accomplished that.
Going forward, Keith Gangl will be taking over as the leader of the investment team and Senior Portfolio Manager. Keith has been with Gradient since 2018 and has been instrumental to our success. Keith will bring a new voice and likely some change along the way, but one thing I am confident in is his ability to provide commentary that is insightful and take actions that will create long-term value for our clients.
So, with that said, it is time for my season of change to occur. Thank you again and I wish you all the best as you navigate markets moving forward.
