Tariffs -> Inflation -> Growth Fears -> Market Decline?

March 23, 2025 - Update

Quick Update this week.

MACRO

• The next M2 data point will be released next Tuesday.

  • If M2 continues to shrink, it could negatively affect the markets in the short term.

• Inflation appears to be easing, with a March 2025 forecast at 2.46%.

  • The main wild card is tariffs, which are difficult to predict in terms of timing and impact on inflation.

• In short, tariff-related inflation uncertainty could suggest a more cautious monetary policy, leading to less credit, slower growth, and softer earnings.

  • This scenario lowers expectations for S&P 500 multiples.

• To improve market sentiment, we’d need a shift from a restrictive to a neutral or expansionary policy.

  • A weaker economy could force that shift, but nobody wants slower growth coupled with inflation—fueling “stagflation” fears.

• For now, these concerns need time to resolve. Current data shows:

  • Inflation is declining.

  • Th…