Economic Outlook
By: Russ Colbert
Winter 2025 (Vol. 42, No. 4)
The United States, the world’s largest economy is expected to perform well this year according to many leading economists. Recession fears have all but gone away by many economists. Inflation is trending back toward 2% and the labor market continues to look strong. Many are predicting that GDP will exceed 2.5% this year. Obviously it is early in the year and we will hope for the best. Some of the key changes following the Republican election sweep of all three branches and how it will affect the economy are as follows: First, Tariff increases on imports from China and on autos may raise the tariff rate by 3 or 4 percentage points. Second, a tighter immigration policy may lower legal immigration as the Republicans try to get control on deportations of illegal immigrants causing a surge on inflation. Immigration has surged since early 2021 and inflation has continued to rise out of control over the same period. If we have high immigration and high inflation, many economists believe the Fed could see lower inflation with lower immigration over time as it shrinks through deportation and other measures, as well. Third, the 2017 tax cuts are expected to be fully extended instead of expiring. There will also be additional modest tax cuts.
President Trump and his economic advisors will make some policy changes that will impact the economy and hopefully stabilize and bring down prices on many goods and services. In the near term I have noticed and heard from others about some of the shopping items I often purchased over the years starting to drop some of their prices, closer to what I was paying a few years ago. This may be occurring due to many consumers like me and others purchasing a cheaper substitute or waiting on a sale price, causing products to sit on shelves longer and companies starting to lower the price of the item to become more competitive due to selling less to customers. So, the company will research and find ways to cut the cost of producing the product. I know we have a long way to go, but hopefully it is the start of prices stabilizing and coming down for many items. On larger ticket items like homes and cars, etc., President Trump and his team are continuing to work on ways to roll back a number of the red tape and excess regulations in order to cut cost of the production of product and materials needed to make these larger items lower in price. There are lots of things that can be done to bring the prices down on products, goods, and services.
Many regulatory and policy changes coming over the next several years should improve the labor markets and add substantial job growth. The tax cuts should likely boost spending. Policy and regulatory changes coming to industry by the Trump’s economic advisors should reduce the cost of goods and services making many items more affordable over the next few years.
Recission fears have faded as the risk that has worried the markets and investors have slowly subsided to a much lower risk. Consumer spending should remain strong by rising incomes driven by a solid labor market. The Federal Reserve should continue to cut interest rates during 2025.
I know President Trump has several problems that have developed over the past four years that have to be addressed and cleaned up. It will not be an easy task and let’s hope he has the right people in place to help him get the jobs done. You can be assured it will be a bumpy ride along the way. I believe he will bring peace to the war- torn areas of the Middle East and Ukraine and other hot spots. I also feel he and his team will make the necessary adjustments to the economy that will continue to improve the economic performance of the U.S. economy.
If you have any questions or need a free portfolio review to keep you on track with your investments or retirement plan, please call me.
Russ Colbert
Senior Portfolio Manager
1-888-878-0001
Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.