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August 2025 #17313 Page #92
Economic Outlook: Resilience and Uncertainty By the Lesko Financial Services Team
he first half of this year ended with the U.S. economy showing a resilience that forecasters weren’t expecting. Solid growth in earnings and jobs, plus a rebound after the chaos of early tariff announcements, powered past the pessimism and steep market declines of April and helped the second quarter end on a positive note while it quieted fears of a slowdown, along with worries about stagflation and/or recession.
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The Trump administration’s sweeping tariff announcements at the beginning of April set the markets reeling. But subsequent trade negotiations prompted the delays of some tariffs and a pullback of others. Business and economic leaders harshly criticized the new tariff policies at first and blasted the sense of chaos about what to expect for the remainder of the year. But as the additional trade agreements were announced and more economic indicators pointed to growth, initial fears began to fade and hints of optimism helped the S&P 500 to steadily recoup early losses, hit a new all-time high, and finish with strong gains by the end of June. The most recent economic news and even assessments by the Federal Reserve that the economy is on solid ground have fostered a better outlook for the second half of 2025. Job creation has remained strong, with the U.S. adding an average of 146,000 jobs each month. Wages have continued to tick up, albeit slowly. Consumer sentiment has also seen a rebound, tempered by more discerning consumer choices. The stock market has been hovering near historic highs and analysts believe some bullishness has returned. Most upbeat of all are revised growth forecasts for the next six months. But some headwinds linger. Geopolitical concerns have surfaced as the war between Israel and Iran flared up when Israel launched a massive attack on Iranian nuclear and military facilities. The hostilities caused oil prices to temporarily spike but the concerns were short-lived; the U.S. decisively struck Iran’s nuclear facilities in June, then brokered a ceasefire and oil prices dropped sharply. But hopes for a similar outcome for hostilities between Russia and Ukraine have hit a standstill, with Russia not showing any desire to negotiate a ceasefire and the U.S. now committed to sending more arms to Ukraine. That conflict is likely to continue to fuel additional economic uncertainty.
Inflation and Interest Rates One other development has been an uptick in inflation after many months of cooling and the inflation rate remaining not far from the Fed’s target of two percent. Prices increased 0.3% in June, reaching an annual rate of 2.7% – the highest since one year ago. Some analysts speculate that the numbers may represent the first signs of tariff pass-throughs with even higher prices in the months ahead. Continued next page
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