The Calm Before the Storm
- Ed Sullivan
- May 29, 2025
- 6 min read
Updated: Jan 7
Market Update: Everything Suggests Bad Economic News is on the Way.
Introduction
Only weeks ago, harsh tariff talk had some expecting an economic downturn. Since then, a guarded sense of optimism has set in. The tariffs were reduced and postponed – at least for now. Jobs grew at a solid pace in April. Unemployment remained steady. Surprisingly, the rate of inflation improved. Some trading partners showed a willingness to negotiate. Reflecting this spate of good news, consumer sentiment climbed, and the stock market recovered. Economists have backed away from dismal talk. Things were all going to be OK.
To top it all off, this optimism will likely be reinforced by data released in the next month or two. And perhaps the recent court ruling against the imposition of some tariffs will add to the optimism.
Unfortunately, this may all be the calm before the storm. The prospects of tariffs will disrupt an already fragile economic growth path. Other factors will weigh against near term growth. These factors include a weakened dollar, aggressive illegal immigration control, pauses in funding on government contracts, and looming increases in federal debt.
Even if the courts bar the reciprocal tariffs, those on steel, aluminum, automobiles, and lumber are likely to materialize. These impacts could be significant and won’t show up in the marketplace until the tariffs are in full effect. That means we won’t see it in data reports until at least a month after that. The skies won’t really begin to darken until mid-summer.
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