2025 1st Quarter Economic Update
As we close the books on the first quarter of 2025, it’s clear this year has already brought its fair share of economic twists and turns. Between new political leadership, trade policy shifts, and inflation pressures, there’s a lot to unpack. In this 2025 1st Quarter Economic Update, we reflect on how the year began, assess current economic trends, and look ahead to what may be coming next.
We had the pleasure of welcoming Tom Siomades, Chief Market Economist at a major financial firm, back to the Secure Your Retirement podcast. Tom helped us break down the 2025 market outlook and provided a candid assessment of the challenges and opportunities investors face. This blog brings you the highlights of that discussion and what it means for retirement planning and your financial future.
A Strong Start to 2025 – But for How Long?
The year began on a high note. January 2025 was strong for the stock market. Typically, a solid January has historically signaled strength for the remainder of the year—a positive indicator for investors and retirees alike.
However, as Tom pointed out, this early enthusiasm quickly gave way to more familiar and persistent challenges: inflation, potential recession indicators, and especially tariffs and the economy.
Tariffs Take Center Stage
Tariffs dominated headlines as the quarter ended. A new wave of U.S. trade policy measures—especially with China—sparked anxiety in markets. On April 2nd, the administration officially announced sweeping tariff measures targeting nations viewed as engaging in unfair trade practices.
This marked a return to a trade war climate reminiscent of 2018-2019. The US-China trade war of that period demonstrated how quickly tariffs can disrupt supply chains, boost costs, and rattle financial markets.
The current administration justified these measures by pointing to trade deficits and the need for fairness. However, as Tom explained, the implementation felt more abrupt and jarring than strategic. The sudden introduction of the policy spiked global trade uncertainty, with parallels drawn to the economic disruptions seen during the COVID-era supply chain issues.
Tariffs and Inflation: A Growing Concern
The natural outcome of tariffs is higher prices for imported goods, which in turn contributes to inflation. Tom highlighted that the public, already weary from the recent inflation cycle, has reacted negatively to the idea that prices could rise again.
This sense of economic pessimism, even when not reflected in hard data like GDP or unemployment, can impact consumer spending. With 70% of the U.S. economy driven by consumers, a pessimistic mindset can lead to slowed spending and potentially contribute to an economic downturn.
Is a 2025 Recession on the Horizon?
While some analysts are still hesitant to call a 2025 recession, Tom suggested that from a consumer sentiment standpoint, we may already feel like we’re in one. Higher costs, volatility in the markets, and global trade uncertainty have created an environment of fear and hesitation.
Although official recession metrics—like two consecutive quarters of negative GDP—haven’t been confirmed, Tom expects at least one negative quarter based on current signals.
The Federal Reserve’s Balancing Act
The Federal Reserve entered 2025 with the expectation that it would begin a series of rate cuts to ease pressure on borrowing and investment. But as the tariff wars escalated, the Fed has taken a more cautious stance.
They’re now in a holding pattern, waiting to see the impact of tariffs before taking action. Encouragingly, the inflation outlook for 2025 has improved slightly in recent months. Tom noted two consecutive months of declining inflation, including one with a negative CPI print—the first since 2021.
If this trend continues, the Fed could regain confidence and cut rates by mid-2025. However, the bond market isn’t convinced. With $36 trillion in national debt, institutional investors are demanding higher returns, which makes rate reductions less impactful than they once were.
Government Spending and Economic Trends 2025
Another major concern Tom raised is unchecked government spending. Since 2019, federal expenditures have increased from $4.5 trillion to over $7 trillion. Yet, many Americans feel their quality of life hasn’t improved proportionately.
With no major reforms to programs like Social Security or Medicare, the financial pressure builds, adding complexity to financial planning for 2025 and beyond.
Economic Forecast 2025: What Comes Next?
Tom sees the next 90 days as pivotal. If tariff negotiations conclude successfully and global partners like Japan, South Korea, and India commit to new trade deals, it could restore confidence and stabilize the markets.
In this best-case scenario:
- Inflation could continue to cool
- Consumer sentiment may recover
- The Fed might cut rates in June
- The market could rally, potentially adding 10-15% in the second half of 2025
However, if tariffs persist, and political infighting blocks fiscal policy progress, markets may remain directionless—or worse, turn bearish.
The outlook hinges on global diplomacy, fiscal discipline, and policy execution. For now, investors must stay agile and informed.
What This Means for Retirement and the Economy
For retirees, or those wondering “is it time to retire?” the current climate underscores the importance of a well-structured financial plan. Retirement and the economy are deeply interconnected.
Volatility, inflation, and policy shifts can all impact:
- Retirement income streams
- Investment portfolio risk
- Tax planning strategies
The Secure Your Retirement team advocates a structured approach to navigate this environment with confidence.
How to Prepare: The Peace of Mind Pathway
At Peace of Mind Wealth Management, we help clients protect and grow their wealth through our Peace of Mind Pathway, a holistic planning framework designed to insulate against uncertainty like we’re seeing in 2025 stock market trends.
Step 1: Peace of Mind Roadmap
We build a detailed retirement plan that addresses income, investments, healthcare, taxes, and estate goals. It includes scenario modeling—like tariff-induced inflation—to stress-test your plan.
Step 2: Strategic Implementation
Your roadmap translates into an action plan for investment diversification, tax efficiency, and retirement withdrawals that align with your lifestyle.
Step 3: Ongoing Nurture
Economic shifts don’t stop. Neither does our planning. We continue to assess economic trends 2025 and adjust your plan as needed.
This is a top-of-mind topic for many. If you have questions from this article, you can schedule a complimentary 15-minute call with us to have a conversation. Schedule your complimentary call with us and learn more about 2025 1st Quarter Economic Update.