Two Possible Outcomes

Markets continue to react strongly to tariff policies implemented by the new administration. The concern is that economic activity will be negatively impacted.

There are two possible ways that this could go in terms of the resulting economic impact: recession and stagnation. We are moving to a point where we think there is better than a 50% probability that one of these two circumstances will emerge. Either will lead to a difficult key economic moment. We are investing on the assumption that one of these two outcomes will likely occur.

Our focus remains investing in a diversified portfolio strategy designed to plow through these difficult times. We will keep adjusting as needed and watch headlines constantly as it does impact portfolio decisions and allocation choices.

We will get through this. Don't underestimate the United States economy. It may be bruised, but it's still the best economy in the world despite today's difficult headlines.

See a brief definition of these two economic conditions. Any questions please let me know.

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“What Is a Recession?

A recession is a significant and widespread downturn in economic activity that typically lasts for longer than a few months. A common rule of thumb is that two consecutive quarters of negative gross domestic product (GDP) growth indicate a recession. However, more complex formulas are also used to determine recessions.

• A recession is a significant, pervasive, and persistent decline in economic activity.
• Economists measure a recession's length from the prior expansion's peak to the downturn's trough.
• Recessions may last as little as two quarters, but the economy may not recover to its former peak for years.
• An inverted yield curve has predicted the last 10 recessions, although some predicted recessions never materialized.
• Unemployment often remains high well into an economic recovery, so the early stages of a rebound can feel like a continuing recession for many.
• Nations use fiscal and monetary policies to limit the risks of a recession.

What is Stagflation?

Stagflation is an economic nightmare, both for those who live through it and the policymakers called on to solve it. This rare economic condition defies the conventional economics that links inflation with economic booms and falling prices with recessions.

First named in the 1960s, stagflation shattered long-held economic theories when it emerged most dramatically during the 1970s oil crisis. Decades later, in April 2025, Federal Reserve Chair Jerome Powell warned that the Trump administration's new tariffs were "significantly larger than expected" with likely effects that included "higher inflation and slower growth," the classic precursors to stagflation. With companies already planning layoffs, Americans faced the prospect of an economic challenge that generations of policymakers had largely avoided.

• Stagflation is the simultaneous appearance in an economy of slow growth, high unemployment, and rising prices.
• Once thought by economists to be impossible as anything but a short-term problem, stagflation's appearance in the 1970s has had monetary officials on guard ever since.
• Policy solutions for slow growth tend to worsen inflation, and vice versa. That makes stagflation hard to fight.
• The U.S. faces its first long-term threat of stagflation in two generations after the Trump administration imposed significant new tariffs in 2025.”

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Source: 
https://www.investopedia.com/terms/r/recession.asp 
https://www.investopedia.com/terms/s/stagflation.asp