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welcome back to episode 37
where we dive into a financial thriller
unfolding as we speak
picture this
the US economy is estimated to shrink at a shocking
minus one point five %
investors are more scared than during the Covid crash
and Trump's tariffs are throwing fuel on the fire
are we headed for a recession
or is this just a bump in the road
grab your coffee because we're unpacking the data
the drama and what it all means for your wallet
let's get into it
welcome back everybody to another deep dive
and today
we are going to be taking a look at the US economy
in 2025 yeah
it's a really interesting time right now
there's a you know
there's some conflicting signals out there
definitely some mixed messages
a lot of anxiety among investors
yeah lot of anxiety
and we're gonna dig into all that
so um
to set the scene a little bit
you know we've got the SMP 500 hitting record highs
yeah it's been a great run for the market
but at the same time we've got this
you know potential recession looming on the horizon
yeah so it's kind of like a head scratcher right
like everyone's bracing for a downturn right
but the market's telling us something different
at least for the moment exactly
and that's what's so interesting
is that despite the market's success
investor sentiment is like extremely bearish
yeah that's the big paradox
so yeah
why why is there this fear factor
what's behind it well
according to the AI Sentiment Survey
which tracks investor sentiment
a whopping 60.8% of investors are bearish right now
60.8% bear which is huge
I mean to give you some context
that level of pessimism is usually only seen during
like major market crashes
wow okay
so it's definitely noteworthy
yeah so what is driving this
what is going on is it just
you know
a knee jerk reaction to the possibility of a recession
or is there something deeper going on here
I think it's a little more nuanced than that
um this fear feels different from what we saw in 2020
for example at the beginning of the pandemic
interesting yeah
I mean back then
there was a lot of panic too sure
but there were also you know
some pretty strong government safety nets in place
right you know
remember the cares act yeah
yeah the Fed also
you know slashed interest rates really quickly
right which helped the market rebound very quickly
yeah I think I remember
you know there was a sense
at least the government was gonna step in
right and
you know try to cushion the blow exactly
so you saying that we shouldn't expect that
this time around well
the feds options are a little bit more limited now
because you know
we're already grappling with inflation right
um and
you know the
the lack of those safety nets that we saw in 2020
is definitely contributing to the current anxiety
among investors right
and they're feeling a lot more exposed this time around
yeah no
no safety net it feels riskier
yeah that makes sense
and to complicate matters further
we have the wild card of Trump's policies
of course um
and a lot of people are pointing to his tariffs as
you know a major source of economic uncertainty
yeah the terrorists are definitely a significant factor
okay so can you kind of remind us like
what's the deal with the Terrace
what's the purpose of them
so right now
we've got a 25% tariff on goods from Canada and Mexico
right and there's also
you know plans for a 10% tariff on all imports
wow not to mention
you know a potential 60% tariff on Chinese goods
yeah a lot of tariffs
yeah a lot of tariffs flying around
so what is the point like
why are we doing this well
the stated goal is to protect American jobs
okay and
you know encourage companies to bring
manufacturing back to the US
but the unintended consequences are starting to show
well higher prices for consumers
for one yeah
yeah I think
I've noticed that
everything seems more expensive these days
exactly The Institute for International Economics
estimates that these tariffs could add between 26 and
seven thousand six hundred dollars
wow to the average households annual expenses
that's crazy that's a big chunk of change
so you're right
consumers are definitely feeling the pinch
yeah and there's another consequence
that's causing a lot of concern
and that is the impact on GDP
you're talking about the the recent GDP bombshell right
the Atlanta Feds GDP now estimate yeah
for the first quarter of 2025 took a nosedife
yeah it went from a positive 3.9% to a negative 1.5
yeah that's a big drug
that was a big surprise yeah
and while we technically need
two consecutive quarters of negative GDP growth
oh right
to officially declare a recession okay
this sharp drop is definitely a red flag
so is it
is it all about the tariffs
what is causing this well
the decline in net exports is definitely a major factor
and that's largely driven by the tariffs right
you know
when goods become more expensive because of tariffs
yeah it reduces demand for those goods okay
which leads to a decline in exports
yeah that makes sense
so we've got this mix of
you know slowing economic growth yeah
extremely high levels of investor fear
and then
these tariffs are kind of adding to the uncertainty
no wonder everyone's feeling a bit uneasy
yeah it's definitely a time for caution
yeah but also a time to be informed
okay good advice
so let's talk about that
let's talk about what we can do to be informed
and how we can navigate
this uncertain economic landscape yeah
and and I think
it's important to remember that these economic
you know shifts rarely impact everyone equally right
I mean some industries are gonna be
you know more vulnerable than others right
so you know
while the
the overall picture might seem a bit gloomy that
you know the impact on your personal finances will
really depend on your you know
specific circumstances that's a really good point yeah
yeah it's easy to get swept up in the headlines
and kind of forget that
the economy is made up of lots of different
moving parts exactly
um so
let's shift gears a little bit
and talk about some of Trump's other economic policies
okay we've talked about the tariffs right
but there's also his push for tax cuts
uh huh deregulation yeah
changes to immigration policy right
and his attempts to like influence the Federal Reserve
yeah a lot's going on yeah
there's a lot going on a little interconnected
which makes it even more complex
very complex uh huh
um can we start with the tax cuts
I know Trump's been talking about extending the tongue
17 tax cuts um right
um maybe even making them bigger potentially
what are the implications of that
like what could happen well
on the surface tax cuts
you know sound appealing
yeah right
because they put more money in people's pockets right
which can stimulate spending and boost the economy
right in the short term right
but there's a potential downside
The Congressional Budget Office has projected that
extending these tax cuts could add a whopping
$4.5 trillion $4.5 trillion to the national debt
wow over the next decade
didn't Congress just raise the debt ceiling to like
40 trillion they did yeah
so the timing of this is interesting
you know it's a delicate balancing act right
you know
the potential benefits of short term economic stimulus
right have to be weighed against the long term risks
of increasing the national debt yeah
which can lead to things like higher borrowing costs
okay so it's kind of a gamble
it is a bit of a gamble um
what about deregulation I know
that's another big part of Trump's economic agenda
yeah he's a big believer in that
he seems to believe that you know
cutting red paper will unleash economic growth right
what are your thoughts on that
well there is some evidence to support that idea okay
um we did see a surge in business confidence
you know during Trump's first term
which some economists attribute to deregulation
you know it can certainly foster a more business
friendly environment right
leading to potentially increased investment
so less regulation could actually be a good thing
for the economy it's possible
but it's important to note that deregulation alone yeah
might not be enough to offset
the other economic headwinds that we're facing right
like the tariffs and the global slowdown right
and it's also important to remember that regulations
often serve a purpose of course yeah
you know like protecting consumers or the environment
right it's about finding the right balance exactly
um now
what about immigration I note
Trump's plan to increase deportations
has been a very hot button issue
yeah very controversial
what kind of economic impact could that have
well the potential impact on the labor market
is a big concern
especially in industries like agriculture and services
yeah that rely heavily on immigrant labor right
so you know
if there are fewer workers available
wages could go up okay
which sounds good for workers
but it could also lead to higher prices for consumers
right further fueling inflation right
so again
is like kind of this you know
potential positives and negative
yeah it's hard to predict yeah
it's hard to say what the ultimate outcome is gonna be
and to add another layer of complexity
oh god
we have Trump's history of
publicly criticizing the Federal Reserve
oh yeah
and trying to influence interest rates
yeah he's not shy about that
not at all how is that impacting the current situation
well it creates a lot of uncertainty yeah
which is never good for the markets right
the Fed is trying to balance
slowing economic growth with rising inflation
okay and they've hinted at rate cuts okay
but Trump's policies especially the tariffs
are putting upward pressure
on prices right
which could complicate the Fed's decision making
so it's like a tug of war
it's a bit of a tug of war
yeah between the Fed and the White House who
with the economy caught in the middle
caught in the crossfire um
and all of this is happening
against a backdrop of slowing global growth right
that's right I mean
both Europe and China
are projected to experience slower
economic growth in 2025 yeah
the US is not alone in facing these challenges
we're all interconnected right
and economic shifts in one part of the world
yeah can have ripple effects globally
okay
so we've got a pretty complex economic picture here
we do
we have slowing growth both in the US and globally
right high levels of investor fear
and a lot of uncertainty surrounding Trump's policies
uh huh
it's starting to feel a bit like storm clouds
gathering on the horizon yeah
the outlook is not great is it time to start panicking
I don't think panicking is ever a good strategy okay
but I do think it's important to be aware
of the potential risks okay
and to take steps
to prepare for whatever might come next
so what should we be doing to prepare
you know batting down the hatches
stock up on canned goods well
maybe not canned goods okay
but
there are definitely some practical things you can do
okay um
you know remember
we're not officially in a recession yet
it's about being informed and proactive
rather than reactive okay
I like that so
you know
just because things are a little shaky right now yeah
doesn't mean you need to go into full panic mode
okay
so what kind of proactive steps are we talking about
well
one of the most important things is to stay informed
okay you know
keep an eye on economic news and data releases
okay
and pay attention to what's happening in your industry
and how your company might be affected okay
you know knowledge is power
especially in uncertain times
got it stay informed
what else um
it's also a good time to review your personal finances
okay you know
make sure you have an emergency fund in case of
you know job loss or unexpected expenses
that's always good advice
yeah for a session or not exactly
um what about investments
should we be you know
pulling our money out of the stock market
that's where things get a bit more nuanced okay
um you know
remember the stock market is forward looking right
so it's already pricing in a lot of this uncertainty
pulling out now might not be the best strategy
so what are you suggesting
like write it out
it depends on your individual risk tolerance
and investment goals sure
but remember
that market downturns can present buying opportunities
for long term investors okay
so maybe
all this fear in the market isn't such a bad thing
after all right
it's creating opportunities
for those who are prepared to take advantage of them
that's a good way to look at it okay
um but what about this stagflation buzzword
oh yeah
that keeps popping up what exactly does that mean
so stagnation is basically a combination of stagnant
economic growth okay
and high inflation okay
it's a particularly tricky situation
because the usual tools for fighting
either slow growth or inflation
often make the other worse oh
so for example
lowering interest rates to stimulate growth
can lead to even higher inflation
that sounds like a lose lose situation
it can be yeah
if the economy stalls while prices continue to rise
it can lead to you know
a decline in living standards
and create a sense of economic Malays
so is stagflation a real possibility right now
there's a lot of debate about that okay
some economists argue that we're
not in danger of stagflation
because inflation expectations are anchored okay
meaning
people don't expect inflation to spiral out of control
right but others are concerned that Trump's tariffs
which are directly contributing to higher prices
right could push us closer to a stagflationary scenario
okay so it's definitely something to keep an eye on
okay so uncertainty is the name of the game pretty much
we got a lot to think about
we do a lot to keep an eye on absolutely
it's all a bit overwhelming honestly
I understand like
what are the key takeaways here
it can definitely feel a bit overwhelming
you know trying to make sense of all this economic data
yeah it is a lot to digest yeah
and conflicting signals absolutely
but I think you've done a great job of kind of
breaking down you know
the key factors at play well
I appreciate that and
and highlighting what we should be paying attention to
hopefully it's helpful for folks yeah
so let's bring it back to our listener okay
and you know
what they can do to kind of
navigate this uncertain economic landscape right
it's all about you know
focusing on what you can control right
you can't control what the Fed does
or what policies the government implements yeah
but you can control your own financial decisions
absolutely so
what are some specific questions that
our listeners should be asking themselves
right now well first
you know
how might
these economic trends that we've been discussing yeah
particularly
the potential for recession or continued inflation
right impact your personal financial situation yeah
are you prepared if the economy takes a downturn right
do you have a plan for managing your expenses
if prices continue to rise
that's a really important point
it's easy to get caught up in this
like abstract discussion of the economy
I know and forget to connect it to our own lives right
it's gotta be relevant yeah
but ultimately that's what matters most
that's what it all comes down to exactly
so um
what are some other things like what
what other questions should we be thinking about
well the second question
I would encourage our listeners to consider is
what specific
economic indicators should you be watching okay
to stay informed and make smart choices okay
are you tracking you know
GDP growth okay
are you paying attention to inflation data okay
are you following the Fed's decisions on interest rates
it's about being informed and proactive
like you said exactly
the more you understand the forces at play right
the better equipped you'll be to make
you know sound financial decisions
absolutely
regardless of what the economy throws your way
and remember
while economic uncertainty can be unsettling
it can also create some unique opportunities
how interesting for example
if the stock market does experience a correction okay
it could present a chance for long term
investors to buy stocks at a discount okay
or if inflation continues to rise yeah
certain assets like real estate or commodities
by perform what yeah
so there's a silver lining potentially
potentially yeah
it's all about understanding the potential risks
and rewards and making informed choices
based on your individual circumstances
yeah I love that perspective
it's not about panicking right
it's about empowering yourself with knowledge
right and using it to your advantage
exactly and I think that's a great note to end on
I agree
um so
thanks for joining us
on this deep dive into the US economy
my pleasure we hope you found it insightful and helpful
absolutely um
stay curious stay informed
and remember you've got this you got this