The first half of 2025 brought major shifts, from sweeping tariffs to a surprising AI breakthrough out of China. Our Mid-Year Outlook explores what these developments mean for growth, inflation, and market strategy heading into the back half of the year.
Key Insights:
- U.S. tariff policy raised the effective rate from ~2% to over 20%, lifting near-term inflation and creating headwinds for growth.
- China’s DeepSeek R1 AI model challenges U.S. dominance in tech, with 10x+ energy efficiency and geopolitical implications for innovation leadership.
- Q1 GDP showed a -0.3% annualized decline, but core demand rose +3.0%, driven by front-loaded imports ahead of tariffs.
- Labor market remains firm, with job gains averaging ~140,000 per month and unemployment steady just above 4%.
- Fed likely remains on hold, facing a supply-side dilemma between price stability and full employment.
- Our base case: 1.0% real GDP growth in 2025, with inflation ending the year above 3%.
Join us on June 4 for our Mid-Year Outlook Webinar as we dig deeper into these themes and their portfolio implications.
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