October Economic Update

Market Summary

In spite of economic warning signs, a government shutdown, new tariffs being implemented, and stock valuations approaching highs not seen since just before the Dot-Com bust 25 years ago, the market shrugged off all of these concerns and moved high last month. The S&P 500 gained 3.49%, the Nasdaq 100 added 5.37%, and the Russell 2000 rose 2.99%. (1)

Labor Market

The looming federal government shutdown in late September forced suspension or delay of key economic releases (CPI, nonfarm payrolls). In light of the delays, the Labor Department recalled BLS workers to ensure the September CPI report is published (critical for Social Security COLA) despite the shutdown. With official data delayed by a government shutdown, the Carlyle Group issued a “shadow” jobs report estimating just 17,000 net jobs added in September (vs. consensus ~54,000). Consumer confidence slid as inflation and job concerns weighed on households. (2,3,4)

Tariffs

On September 26th, the Trump Administration released new industry-specific tariffs to begin on October 1st. These include a 100% tariff on any branded or patented pharmaceutical products, 25% on imported heavy trucks, 50% for kitchen cabinets and bathroom vanities, and 30% for upholstered furniture. It was also announced that the Administration is considering tariffs on foreign electronic devices based on the number of chips in each device as a means to encourage companies to shift their manufacturing to the United States. They are also targeting a wade range of consumer products from toothbrushes to laptop computers. (5)

Tariffs have been impacting farmers significantly as China has shifted their importing of soybeans from the US to Brazil in a retaliatorily move. Farmers have now found themselves with a significant supply with no one to sell their product. President Trump has indicated he may implement an aid package worth $10-$15 billion, a move critics argue that is far closer to socialism than capitalism. (6)

The biggest tariff news happened on the day of writing this newsletter when President Trump announced a warning of a “massive increase” in China tariffs which jolted Wall Street at the close of an already turbulent week marked by growing concern over a potential bubble in artificial intelligence companies. Several hours later and after the stock market closed, Trump announced there will be a 100% tariff imposed on every product made in China beginning November 1^st. This all comes on the heels of China announcing stricter export controls over rare earth metals which are essential for the production of many US goods including chip manufacturing used for artificial intelligence. (7)

A summit with China’s President Xi Jinping was scheduled for later this month, but Trump stated he saw “no reason” to meet, citing “hostile” export controls. His social-media post followed a string of actions by both Washington and Beijing aimed at restricting the flow of technology and materials between the two nations. Many believed the worst of the trade wars with China were behind us until this escalation proved otherwise. (7)

Looking Forward…

Tariffs will once again be at the forefront as we enter into a historically soft part of the year for the market. Both China and the EU have been pressing back firmly against the White House’s trade policies. Concerns over sky-high valuations, soft consumer data, and a rapidly weakening job market will also be closely watched. We may see a more volatile market over the next couple of months.

---

Monthly Financial Tip:

Investing too conservatively in retirement could mean losing the chance to grow your money faster than the rate of inflation. Some fixed-income investments are earning less than 3% annually.

---

Citations:

1. Ycharts, Invesco, Rueters

2. Wall Street Journal, Oct 09, 2025

3. Reuters, Oct 07, 2025

4. Associated Press, Sept 30, 2025

5. CNBC, Sept 26, 2025

6. Financial 26, 2025

7. Financial Juice, Oct 10, 2025

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

September Economic Update

Market Summary

The major large capitalization indices were once again relatively quiet for the second month in a row while small capitalization significantly outperformed. Weakening jobs data took the spotlight with inflation, consumer spending, housing data, and tariffs were heavily scrutinized. For the month, the S&P 500 gained 1.91%, the technology heavy Nasdaq 100 index gained 0.92%, while the Russell 2000 moved sharply higher by 7.30%. (1)

Labor Market

August non-farm payrolls were very weak, with only ~22,000 jobs added which was far below expectations and the lowest since the initial COVID response back in 2020. The unemployment rate rose to ~4.3%, which is the highest in about four years. Revised data for previous months (June/July) also showed downward revisions. (2)

Weakening employment growth plus rising unemployment set the stage for monetary easing with the Federal Reserve lowering interest rates, but inflation remains well above comfort zones meaning the Fed will act cautiously to balance these forces. As of today, the Federal Reserve has decided to cut interest rates by 0.25% citing a notably weakening labor data, a stagnating real estate market, and moderation in GDP growth which is largely reflected on consumer spending slowing down. (3)

One notable and highly impactful trend has been large companies – especially within the technology sector – accelerating layoffs and replacing those jobs with artificial intelligence (AI). Microsoft, Oracle, Amazon, Google, and Meta have laid off thousands of workers just within the past few months. This trend is undoubtedly contributing to the alarming unemployment numbers and fewer job openings that we have been seeing as of late and will likely accelerate moving forward. (4)

Inflation

Inflation rose in August with the headline Consumer Price Index (CPI) moving up to 2.9% year-over-year, up from 2.7% the prior month. Key drivers of inflation included grocery prices, gas, apparel, and housing/rental costs. Tariff-driven cost passthrough to consumers has become more visible in goods prices. On the other hand, wholesale prices (Producer Price Index, PPI) showed a softer picture. PPI rose less than expected, and monthly wholesale prices actually saw a dip on some readings. (5)

Tariffs

The Trump Administration continued to expand tariffs. Notably, India saw its “reciprocal” tariff rate raised to 50%. Average effective U.S. tariff burdens (including retaliation effects) continue to be very high — estimates from Yale’s Budget Lab indicate the average effective rate is the highest since the 1930s with consumer-price effects (short run) potentially ~1.5% to 1.8%. Tariff revenues lifted net customs receipts significantly—one month (August) produced record levels – helping reduce the federal deficit compared with a year earlier. (6)

Looking Forward…

Roughly 70% of Gross Domestic Product (GDP) is predicated upon consumer spending. When the job market becomes tight and unemployment rises, consumers begin shutting their wallets and tighten up on spending habits. This, along with the impact of tariffs and inflation, also known as “Stagflation”, are the primary concerns moving into the latter part of this year.

---

Monthly Financial Tip:

Credit card debt is an ongoing financial drain too many people accept. Paying off a credit card with a 12-20% APR is a win akin to getting a 12-20% return on your money.

---

Citations:

1. Ycharts, Invesco, Rueters

2. Rueters, Sept 05, 2025

3. Federal Reserve, Sept 17, 2025

4. Investopedia, Sept 13, 2025

5. Federal Reserve, Sept 17, 2025

6. The Budget Lab, Aug 07, 2025

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

August Economic Update

Market Summary

It was a relatively quiet July for the markets given the backdrop both globally and domestically. Second quarter earnings season kicked off with mixed results in a market with the second highest valuations in history, only behind the pre “Dot Com” bust back in 1999. There has been some trepidation with these valuations, especially since the surprising jobs report that was released last Friday. For the month of July, the S&P 500 gained 2.17%, the Nasdaq 100 2.38%, and the Russell 2000 moved higher by 1.68%. (1)

Tariff Update

On the trade front, the White House announced new agreements during July with key partners including the European Union, Japan, and South Korea. Discussions with China are still ongoing. While these deals avoided the worst-case scenarios feared earlier in the year, some countries may still face elevated tariffs after the negotiation window closes. On July 31, President Trump signed an executive order outlining revised tariff rates for several trading partners, with implementation now scheduled for August 7 (pushed back from the original August 1 deadline).

As of July 23, the Yale Budget Lab reported that U.S. consumers are now effectively subject to an average tariff rate of 20.2%—the highest level since 1911. Thus far, companies appear to be absorbing much of these added costs rather than passing them on to consumers, though that could change depending on how tariffs evolve and how businesses adapt. (2)

Jobs Report

Fresh economic data released after the Fed meeting showed a weakening labor market, with just 73,000 new jobs created in July. Revised estimates for May and June revealed 258,000 fewer jobs than previously reported. This was the lowest number of jobs added in the US since the peak of the COVID era back in 2020. The new three-month average now sits at just 35,000 jobs per month—well below the historical norm—potentially shifting the Fed’s attention more toward employment and increasing the likelihood of rate cuts, possibly as early as September. (3)

Tax Bill

On Independence Day, President Trump signed a wide-ranging tax and spending bill that permanently enshrines many provisions from the Tax Cuts and Jobs Act, including existing income tax rates and brackets. The legislation brings greater policy certainty for investors and taxpayers but has also reignited concerns about long-term fiscal sustainability.

According to estimates from the Congressional Budget Office, the new law will add more than $3 trillion to the federal deficit over the next ten years. While the legislation includes some spending reductions, these are more than offset by the revenue losses resulting from permanent tax cuts.

Looking Forward…

In the wake of the July jobs report, there are growing concerns regarding economic growth beginning to stagnate. There is also the August 7th tariff deadline which if implemented, would impose reciprocal tariff rates—ranging from roughly 10% up to 41%—on imports from over 60 trading partners. Countries without negotiated agreements will face a default tariff of 10%. Other nations may face higher rates based on trade deficits or failure to reach satisfactory arrangements. After a calm July, the latter part of the third quarter may begin to heat up once again.

Citations:

1. Charles Schwab, June 30, 2025

2. Budget Lab, July 23, 2025

3. BLS, August 01, 2025

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.