Macro Minute: Week of March 3, 2025
We are seeing a fairly dramatic slowing in the economy. Some of this is uncertainty that is being caused by policy changes and businesses attempting to front run those policies. For example, the GDP nowcast updated to -1.5% on February 28th from 2.3% on February 19th. The dramatic change is caused by a swelling trade deficit caused by a front running of anticipated tariffs. We have been having consistently negative economic data releases of late too. The Citi Economic Surprise Index does a good job of combining this data.
As you can see, since December, the data has been trending down and has recently turned negative. This does not indicate that an economic downturn is certain, but that the data hasn’t matched expectations. This also coincides with the downturn we have seen in the 10-year yield.
These things tend to be self-correcting if a recession does not occur with job losses. One reason for this is as the 10-year drifts lower, so does financing costs, including mortgages. As rates move lower, all things equal, businesses and households are incentivized to use more credit, which stimulates economic growth.
That leaves us watching to see how far this soft patch in growth persists and if it causes the Federal Reserve to begin to be more accommodative. I will be watching the jobs report this week along with the 10-year treasury. I expect equity prices to remain somewhat volatile until we start seeing economic growth stabilize.
DISCLOSURES:
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.