Ep. 301 – 2025 – Economic Update with Andrew Opdyke
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In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss:
The US economic outlook for 2025 with returning guest Andrew Opdyke, an economist who provides valuable insights into the key economic factors shaping the year ahead. With Federal Reserve policies, inflation and interest rates, and market volatility dominating financial conversations, we break down what investors and retirees need to know.
From employment trends to investment strategy, Andrew highlights how government policies, market shifts, and technological advancements—such as AI and automation—will influence US economic growth in 2025. Whether you’re focused on your retirement plan, portfolio diversification, or simply trying to make sense of 2025 inflation trends, this episode is packed with expert analysis.
Listen in to learn about:
· How Federal Reserve policies and interest rates could impact your retirement planning
· Why market volatility is expected in early 2025 and how to prepare
· The economic impact of Trump’s policy changes, including tariffs, tax cuts, and regulatory shifts
· The role of technology and economic growth, including the rise of AI
· Why US employment trends could dictate how quickly the economy stabilizes
In this episode, find out:
· How inflation trends from 2024 set the stage for Federal Reserve policies in 2025
· Why market volatility explained matters for investors and retirees
· The impact of US employment trends on economic growth
· What to expect from Trump’s policy shifts in trade, taxation, and regulations
· Why technology advancements could shape the future of the economy
Tweetable Quotes:
· “The Federal Reserve has a balancing act in 2025—cutting rates while ensuring inflation doesn’t spike again.” — Radon Stancil
· “2025 is shaping up to be a year that economic textbooks will reference—whether for policy success or political gridlock.” — Murs Tariq
Resources:
If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!
To access the course, simply visit POMWealth.net/podcast.
Here’s the full transcript:
Radon Stancil:
What is the economy going to be like in 2025? Well, that’s a big question.
And for big questions, we bring on a big guest. And today we’ve got Andrew Opdyke,
who is an economist, and he breaks down what’s the economic landscape. How is it
going to affect us? You want to listen to this all the way through. We hope you’ve
been enjoying all the episodes from Secure Your Retirement. If you’d like to keep
learning and receiving so it’s hit the subscribe button and the bell so you receive
alerts when they come out. We’ve helped thousands of listeners get on the path to
securing their retirement. Now it’s your turn, let’s dive in.
Radon Stancil:
– Welcome everyone to Secure Your Retirement. We are excited, we look forward to this
particular week, you know, special episode that we do every quarter with Andrew
Opdyke. So, Andrew, thank you very much for coming back on to Secure Retirement
Podcast and letting us pick your brain here about the economics and the economy.
Andrew Opdyke:
Yeah, thank you so much for having me. Great. So, you know, we’re sitting here
first of the year and we kind of would like to just, you know, throughout last
year, we did a few of these episodes and we talked about things as we were moving
through. So, I guess if you could, could you kind of like summarize as you now have
had a chance to maybe look back at 2024 and say, do you think it was a good
year? What was the positives? What were the, you know, things that we, that we
always look back and say, this was what 2024 was? Yeah. No, I mean, at the end of
the year, I think it was overall a solid year. We had economic growth. We didn’t
see a recession. It looks like GDP for the year was up two and a half, 3%.
Employment continued to grow. It’s slowing, but that was expected when you came out
and we’re seeing excessively high numbers for the employment gains in 21, 22,
we knew that that would kind of normalize. So, it was a year where progress
continued. Obviously, major government spending continued last year. We ran about a 1
.7 trillion-dollar deficit, but coming into 2025, it’s an environment that does leave
kind of a lot of questions. The Fed going into last year said they were going
start cutting. At some point, they did that. The pace ebbed and flowed throughout
the year. If you remember, about a year ago today, the market was expecting for
2024, the Fed was going cut six times. And by the time we made it to the middle
of the year, when inflation had been stubborn, it got down to two, they ended up
doing four. So, you know, we kind of rode with the ebbs and the flows. We’re in a
decent footing coming into this year, but obviously we had elections last year and
that sets up 2025 is a year where a lot could change. Yeah, so,
you know, while we while you mentioned inflation and the Fed and I think that’s a
big focus of what this year is going to be, I this morning, I, you know, we woke
up to the market and regardless of the day that this prop broadcast, we woke up to
the morning, the markets this morning with a little bit of volatility. One of the
reports were around previous jobs numbers that came in, unemployment being stronger
than expected, jobs being stronger than expected. And the fear of that kind of
jarred the markets a little bit today with the fear around, well, what is the Fed
going to do with a stronger than expected economy? So, one, could you explain to
someone that doesn’t do this every day, why is that a concern of the Fed that,
hey, yeah, it’s kind of counterintuitive mark economies doing. Well, you would think
we could cut rates but why is that not the case and they maybe go into what
you think is going happen this year with inflation and the Fed are There are threats
of inflationary items going up and you know, that could go all over the place with
the Trump being inaugurated here in a week or two and so just take that and run
with it Andrew
Andrew Opdyke:
Yeah, it’s kind of its counterintuitive, right? It was like good
news was seen as bad news from the markets. We got more jobs than were anticipated.
The employment market looked healthier than was anticipated, and the markets went down
in response. The way I would explain it, the Fed has a dual mandate. The Federal
Reserve is tasked with two things, inflation and employment. And so, as employment was
weakening, again, we’ve seen that slowing down in employment, and there’s been,
there are some weaknesses. If you start to dig beneath the surface within employment
Over the last 12, 18 months, the dominant players and employment gains have come
from government jobs and healthcare jobs and healthcare is the largest government
subsidized sector. The groups that have been leading job gains are not the typical
leaders. If you go back pre COVID, those two groups are making up 12 to 14 % of
job gains. Now they’re running 50 to 60%. But when the number came in stronger, the
fear from the market was the Fed has been cutting rates; they’re making it cheaper
to borrow and buy a house, borrow and buy a car, borrow and invest in a business.
All else equal to market views lower rates as a good thing for companies. And when
the employment number came in stronger, it brought into mind this question of, okay,
is monetary policy looser than we thinking? Are rates already accommodated? Can the
Fed afford to cut more? Because if employment is this strong and you continue to
cut, there’s a risk that you’re going to push inflation higher and that’s the
major risk for the Fed when they’re looking at their balance of what they’re trying
to accomplish here in 2025. They’d like to continue cutting rates, but let’s again
remember the last four or five years for them. 2020 they said there wasn’t going to
be any inflation and if we saw any, it would be transitory. They said that again
in 2021 and we ended that year with inflation around 7%. In 2022,
they acknowledged, okay, we were wrong about the transitory thing. And we’re going to
have to do a couple of rate cuts. They told us in 2022, they were going to do
three rate cuts. And that would bring inflation down to 2%. They did 17 rate cuts.
And here we sit going into 2025, we’re still not at 2%. And over the last six
months, the inflation numbers have started to move more ways instead of trending
down. We’re noticeably off where we were 79 % going back a few years ago,
but the Fed is starting to stumble on a little bit of that progress. And the
market’s asking, did you cut a little too quick when you started? Is it going to
be a slower pace? If you were to go back three, four months ago, the market was
expecting four rate cuts this year. Now they’re down to one. So, I think that’s what
the market’s responding to. The market’s saying the Fed is not going to be able to
move as quickly as expected. So those lower rates won’t flow through and benefit
companies as much as was previously expected. And then there’s the political wild
card, right? And going in, we’ve got an election year, we’ve got the Republicans,
Trump won the presidency, the Republicans have the House and the Senate, and that
sets up the possibility for changes to tax policy, to regulatory policy,
to trade policy, to immigration policy. There’s a lot of question marks on the
agenda in 2025 and depending on how those move it could really set the stage for
how much the Fed is able to move. There’s going to be a battle in Washington I
think here in 2025 between the Federal Reserve and the federal government and whoever
takes that leadership if we see a lot of change coming out of Washington that may
free up the Fed to make more moves but if we don’t see a lot of traction and the
status quo holds it probably will be a slower year for the Federal or at least as
it relates to rate cuts. – Yeah, so I guess, you know, as we’re sitting here in
the first part of the year and we think about this administration change that’s
coming, what do you think? I mean, as you look at things, it does sound like there
is a lot of items on the agenda and it looks like the new administration is going
to appears to be moved very quick, try to get some things accomplished right in the
beginning of whatever that might be. What do you see kind of happening here first
quarter as far as maybe some of those things that you think might get accomplished
as well as how that’s going to affect the markets? Yeah, there’s going to be a lot
of talk. That’s for sure. When you look at what the administration has said they
want to accomplish coming in, it’s not that different from the first go around with
Trump. If you remember, you know, going back to 2016 -2017, Trump came in and said,
“I’m going to be tough on immigration. I’m going to be tough on trade, particularly
China. I’m going to cut tax rates. What’s he saying this time? He wants to cut tax
rates. Again, corporate tax rate. What the question is coming into this year that
was going to be decided by the election was those Trump -era tax cuts we got that
started in January of 2018. Those were set to expire here at the end of 2025 and
depending on who was in office, we could have seen those completely expire and rates
move back higher. We could have seen if there was a mix between, let’s say, the
House and the Senate. We could have seen a situation in which some of those passed.
With the Republican sweep, we’re going to see the full extension, I expect, of those
tax cuts. So now the focus has become, we know we can pass that. That’s what the
administration is saying. What other regulatory pieces can come through? You’ve heard,
if you turn on the TV, about the trade negotiations with China, with Canada, with
Mexico. They’re looking to, similar to the first go -around, try to stabilize or
really ingrain relationships with trusted trade partners and in areas where they feel
like people aren’t living up to their commitments that have been made, you know, at
prior points in time, put a little pressure on. Now, again, Trump is volatile,
right? We all know that. Whether you love him, whether you hate him, personally, I
hate politics, but I care a lot about policy. And so, the questions are going to
be, you know, how much of this is emotion, how much of this is him tweeting, and
what do we see from action and the people that he’s putting together, I think there
is going to be in those initial weeks and months, there’s going to be a lot of
focus on the immigration and the trade. And I think as they figure out some pieces
on that, the tax cuts, I think you will see this year, I think the corporate tax
rate, which is currently at 21 % back in 2016, it was at 35%. I think that’s going
to go down to somewhere in the 15 to 18 percent range. I think 18 is the number
and that’ll be a tailwind from the earnings standpoint for US based companies. But
it’s really, I would argue, the biggest wild card this year is the Department of
Government Efficiency. They’ve got Elon Musk coming in and Vinic and they’re saying,
hey, you know, let’s figure out. We ran 1 .7 plus trillion-dollar deficits each in
the last two years. That’s the kind of spending we do in a recession. That’s the
kind of spending we do when we are in an active war and we weren’t in either one
of those here the last two years. If they get traction, if they come in and say,
okay, we’re finding areas to cut and they’re able to pull back on government
spending, it does two things. One is it slows economic growth in the short term,
right? Because if government is spending a dollar, if they’re buying activity, they’re
building a building, they’re putting in plumbing, they’re buying, you know, planes,
that does add to to activity in the economy, so in the short term, if that goes
away, you could see some economic volatility, but it also would ease some of the
inflationary pressure. So that’s what they’re really looking at going into this year.
There’s going to be a lot of areas to watch, but again, we also look at history.
This is not the first time that something like this has been tried. If you go back
to 1982, under Reagan, we had the Grace Commission, and the Grace Commission, they
took 36 working groups over 18 months had them go all around congress all through
government and try to find areas where they can make things more efficient, they came
back to congress with a recommendation list of 2 ,500 items okay and these 2
,500 items they said Hey if you do this if you implement these, we believe you can
save about a half a trillion dollars over the next three years and that was in
1982 dollars but ultimately Finding what you see as efficiencies and getting Congress
to commit to make changes. There’s a lot of interest groups that are involved
getting the actual change is much harder than proposing change. And that is going to
be a critical question here in 2025. This could go down as a year that the
economics classes look back on the textbook to use as a case study, but it really
just depends on whether it’s all talk or whether we see action. And that only time
will tell. Yeah, while we’re on politics one more question I’ve got maybe you
could take a minute explaining and I think you know the buzzword has been one of
the buzzwords in in the whole political cycle here over the last few months has
been tariffs and how that could help things out I think there’s a misunderstanding
of what a tariff is and who is actually paying Um, so could you give us just a,
you know, a little explanation as far as what a tariff is, who pays that, and does
that, how does that impact us? Yeah, no, it’s a great question. Tariffs, I think,
are often misunderstood. The idea behind a tariff is you’ve got somewhere, we’ll use
China as an example, because Trump put tariffs in on China during his first
administration in areas like steel and aluminum. China was getting subsidies from the
Chinese government Chinese companies were so they were able to produce and export
steel and aluminum at lower costs than any other group unsubsidized was able to
produce that and so here in the United States they said look steel and aluminum we
need those we need the capacity we need the ability to be able to produce those we
needed more time we needed for infrastructure we can’t be relying on foreign
governments for that so when they put a tariff in place essentially what it was is
the tariff says, anything that’s being imported from you or Chinese steel and
aluminum gets imported into the United States; a tariff is going to be paid. Now,
ultimately, it’s not that China’s sitting there, China’s paying the tariff and no
price has changed here in the United States. Realistically, what happens is it pushes
prices up and consumers buy, right? Consumers are the ones that ultimately pay the
price as businesses pass through that higher cost. But Tariffs are also tricky
because they’re a bit like Swiss cheese. If you look back at the tariffs, again,
with steel and aluminum, they got a nest. Because when a tariff gets announced,
it doesn’t apply immediately. From the discussion to implementation on that tariff,
it took about 11 months, and during that 11 -month time period where they figure out
logistically how this works, you know, how are they going to apply it, where are
they going to apply it. Companies are allowed to apply exemptions. There was close
to a half a million companies that applied for exemptions on steel and aluminum. You
had companies that produce medical devices and they said, hey, look, you know, if
you, if you don’t exempt us, prices are going to go up for medical tools. And then
you had companies that were doing things like child car seats. So, people hear
tariffs, they hear, oh, we’re going to put tariffs on China. We’re going to put
tariffs on Canada. We’re going to put tariffs on Mexico. Well, Canada and Mexico are
much harder to put tariffs on in China because we have a standing US, Mexico,
Canada free trade agreement that got put in under Trump 1 .0. I would look at that
as a lot of political posturing, saying, hey, look, we’ve got some disagreements,
whether it’s related to the border or industries, oil, auto manufacturing, like we
know there’s disagreements, we’re going vocalize them, let’s bring everybody to the
table and figure things out. When we see tariffs, I think they’re less impacting
than many people presume, but they do have an impact. If you look at US and China
trade relations over the last eight years, US purchases from China are down about
25%. What it does, if there’s uncertainty, and particularly as the US applies
tariffs, it makes companies, because so many companies today are global companies.
They look at it and say, if we’re going interact with the US, if we’re going sell
to the US, Maybe China’s not the place we want to be and so they moved a lot of
activity S &P 500 company’s European companies Asian companies Ended up moving not
necessarily bringing that activity back here in the United States But we saw a
pickup in activity with Vietnam with South Korea with France with Malaysia at the
end of the day After the tariffs in Trump 1 .0 the US bought more from
international partners than they did before the tariffs. It didn’t lead to a
reduction in purchases. It didn’t lead to a reduction in trade activity, but it did
shift who that trade activity took place with. So, when you hear tariffs, you will
see them go in action against China with a lot of Canada and Mexico. I think
there’s a lot more bark than bite. It’s posturing, and I wouldn’t spend too much
time being overly concerned about the discussions there. Okay, great. So, every time
we do this with you, Andrew, we like to kind of do this thing where we ask you
your concerns and then what you’re looking forward to to end on a positive note. So
as you look at 2025 and all these things that we’re talking about, when it comes
down to real concern that, you know, we could even say if this happens, were
that’s going to bother me or that’s going to be a scary thing or what is it that
you think maybe is already in place that’s going to be something that could be a
difficult scenario. What is your concern looking throughout 2025? One, which I think
we’ve talked about before. I mean, you’re noticing there’s a lot of like a political
turnover happening around the world. You saw with Justin Trudeau in Canada, you’ve
seen it in France, you’ve seen it in Germany. There’s been discussions in the UK.
One of those hot button items that’s been out there that remains on the radar is
China with a place like Taiwan. The US has made tremendous strides in terms of
starting to bring more of that chip production to the United States, the TSNC plan
down in Arizona, Samsung in Texas, the plan to Intel’s building, but there is still
a lot of geopolitical uncertainty out there and that can bring inflationary. What’s
going on in the Middle East with Israel and Gaza, Hamas firing on the ships in the
Red Sea is putting a lot of pressure now on some of the trade that’s going through
that region. It’s pushing a global fray rate. So, I think geopolitical instability is
still, something certainly to be watched, but quite honestly for me, one of the
bigger concerns over time, again, this could be a year we go back in the history
books and look and say, hey, we made some changes. There’s agreement really on both
sides of the aisle and even from outside groups like the International Monetary Fund,
we can’t continue to run $1 .7 trillion deficits. It’s not sustainable. We can’t
continue to run deficits that are growing faster than our economy is growing. And so
one of my concerns this year is if we start to see movement on it and it peters
out, that this is a chance to kind of get the ball rolling. And again, I hate the
politics side of it, but it’s not a Republican thing. It’s not a Democratic thing.
It’s one of those times every few years, every few decades where both sides of the
aisle have to sit and look and say, okay, where is change needed. You’ve probably
heard things like social security are set to run out of full funding in the next
decade. It’s time to get the fiscal house in order. It’s time for both sides of
the aisle to come together and say, let’s address this. So, my concern is we’re not
going to get as enough traction there and it’s going to lead to a bigger fight
over these issues in a year or two or three. But there’s also a lot of potential
there. Yeah, so let’s and this one today here on a positive note.
So, obviously, there’s a lot of uncertainty coming into this year, and there’s a lot
of things that will be said, and then actually what will be done. So, what are you
excited about going into this year as, you know, we walk into 2025 and how does
this year play out? So, one of the things I’m most excited about is we’re starting
to see things broad now. We’re starting to see more participation. If you look at
earnings growth expectations for this year, you’re starting to see more activity
coming from small and mid -sized businesses. You’re starting to see it come from some
of the areas that haven’t participated as much over the last two years. And that’s
the sustainable growth that we need. I think you’re going see that in employment.
Again, I mentioned it’s been heavily concentrated over the last 12, 18, 24 months in
government and healthcare. I think you’re going see that start to broaden out. I’ll
tell you, I love to read, right? I love to read over the Christmas break. I think
I got through five or six books. And the more that I read, the more that I look
at what is taking place, we have unbelievable tools today. If you haven’t read, I
think with Elon Musk coming in and Doge. Right. I wanted to read a little bit
more. I don’t know much about Elon Musk. So, I read the Elon Musk biography by
Walter Isaacson. Fantastic book. And again, whether you hate him or you love the
guy, just like with Trump, you know, he’s an interesting character. And when you
look at what’s been done, I didn’t realize the scope to the degree of what’s being
done with SpaceX, what’s being done with artificial intelligence, what’s being done
with solar production. It’s, we are making massive technological strides now. We are
moving at an incredibly quick pace. And a lot of times those business advancements,
those improvements kind of get pushed to the background because of all the political
fighting that’s taking place, but the tools are there, right? We’re seeing a
broadening out. We’re seeing unbelievable tools put to work. We’re seeing progress
that wasn’t, I think feasible 10, 20 years ago, because the technology didn’t exist
to allow us to apply new ideas to try new things out. So, there is, again, this is
a year of promise, okay? There’s a lot of unknowns, but this is also a year were
we’re hitting strides with certain technologies, strides in certain industries. And
this year, as we end 2025, we’re having this conversation in 12 months. I think
we’re going look back and say earnings were probably up for the year for companies.
There was a broadening out, it was a more sustainable growth path. It’s a growth
path that gives us building blocks to build off of in the future. And that’s
necessary to concentrated positioning we’ve seen over the last two years. Concentrated
movement over the last two years, most concentrated, quite frankly, that we’ve seen
since the late 90s, that was always going to be difficult to maintain. So, broadening
out, leveraging the tools that we’ve got, I think provided a lot of opportunity in
the era. – So, a quick follow up to that, because you mentioned AI, I was listening
to a different podcast and they equated AI and the boom and the excitement that
happened all last year, obviously tremendous growth that drove the markets. It was
the reason that the markets were up as good as they were last year. And so, we
walk into this year. Does that, do you see that level of growth? I know we’re
seeing broadening out, but do you see that level of growth continuing? That the
analogy that was made is when the iPhone first came out, the first five iPhones,
you would see dramatic differences between one to five and then to 10. But here
over the last few years, the last four or five iPhones kind of slowing down as far
as innovation there. So that was an analogy made with AI. Obviously, I don’t think
we’re there yet, but what are your thoughts on that? – I kind of look at AI like
the internet, where it’s like the internet. You know, it’s one of those things, if
you look back now and ask anybody, what was the most influential technological change
we had in the last 50 years, I think most people would agree, the invention of the
internet from rolling out of the internet, right? The way that we’d engage with it
was arguably the most transformational technological shift we’ve seen in the last 50,
60, 70 years, just like electricity was in the early 1900s. But it took a little
while. It took a couple of years for us to figure out how to use it. I think AI
is still in those phases. But along with AI, when we get new technological shifts,
what happens along the way is we’re constantly improving the tools that we know
we’re going to work. We’re constantly building up our electrical infrastructure, we’re
building up the water infrastructure, we’re building up the data, we’re building up
the chips that we have to use. And a lot of those will get used for AI, but
they’ll get used for other things as well. So, I do think it’s still a little early
to say, hey, we’re going really see the gains, the earnings and the productivity
show up from AI. I think there’s still going be a little time for that to take
place, but I think the building blocks again are showing up there. And whether they
get use right the internet people like oh everybody’s going to buy their you know
their clothes online they’re going to buy their books online and we got there we
ultimately did get there but we found other uses in the interim that brought
productivity gains and a lot of the value from a market when we talk about
investing came from areas that were unexpected I think we’re to see that with AI
let’s give it time give it some patience we always overestimate how much technology
will impact things in the short term we underestimate how much impact it can have
over time. Let’s look at the whole infrastructure surrounding it. Let’s look at all
of the other activity that we’re building that will prepare us for AI, but are also
preparing us to leverage technology, leverage chips, leverage productivity, whether it’s
through the AI field or surrounding areas. I think there’s going be a lot of side
things that ultimately flow through that we looked back in five, six, seven years
ago and say We were building for AI and we got these benefits along the way. And
I think that that’s going be very consequential. – Excellent. Well, thank you so
much, Andrew. As always, it’s very nice to have your big picture on the overall
economy, not only here for us domestically, but from the world’s perspective. So
again, we certainly do appreciate, we know our listeners appreciate it too. So, thank
you so much for coming on. – Thank you for having me. –
Radon Stancil:
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