Another in a long line of Presidential disasters brought on by ignorance and incompetence continues to be a plaque on the markets. Obama, as you might remember, was leading us into a recession during his second term by overregulating everything in sight. I’m sure his intentions were good but he kept increasing costs and slowing economic growth anyway. Trump is no different. His tariffs lead to both an economic slowdown and inflation. This is commonly referred to as a stagflationary recession. Inflation was lower at the start of Trump’s second term in office and is now about 35% higher. The economic slowdown, also due to tariffs, is reflected in the Leading Economic Indicators (LEI) as summarized as follows:
“The US LEI fell again in September, marking a second consecutive decline,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Weakening expectations from consumers and businesses led the overall contraction in the Index. Subindexes that contributed negatively to the LEI were consumer expectations and ISM® New Orders Index, followed by manufacturers’ new orders of consumer goods & materials, initial claims for unemployment Insurance (inverted), and the yield curve. However, stock prices, the Leading Credit Index, and manufacturers’ new orders of nondefense capital goods excl. aircraft did contribute positively to the Index. The LEI suggests slowing economic activity at the end of 2025 and into early 2026, with GDP weakening after strong mid-year consumer spending and Q4 disruptions amid the federal government shutdown. Overall, growth remains fragile and uneven as businesses adjust to tariff changes and softer consumer momentum. The Conference Board expects GDP to expand by 1.8% in 2025, before falling to 1.5% in 2026.”
Like the post pandemic period when the FED thought that inflation was only transitory and then corrected itself in order to bring inflation down by repeatedly raising the discount rate and Federal Funds rate target, I expect it is wrong again that inflation won’t be another longer-term problem. Most firms have front ran expected tariffs by purchasing inventory before the tariffs hit but are now faced with either contracting margins and falling profits, or they must pass the tariffs on to consumers. On top of that, increasing health care costs will soon show up in the price indexes. The bottom line is that we have a ways to go before we see the end of slower growth and inflation.
I would continue to invest with caution. Some well researched growth, dividend, and ETF recommendations include the following: For growth you should consider: NRDS, HRTG, KGC, KROS, ANIP, CGAU, BVN, NEM, AEM, and AGX. For dividends and growth: CION, CWENA, APAM, CNQ, TIMB, ENGY, PINE, and PSTL. The previous three months saw the following five ETFs greatest percentage gains in market value: PSI, SOXQ, SOXX, SMH, and VHT. The first four ETFs are all in the semiconductor space.
As always, good investing!
