In the Loop – April 18, 2025

“In The Loop” is designed to give you a short update reflecting major developments, earnings, and investment trends across some core Equity Income and Growth holdings. All clients should be aware that individual buy/sell recommendations will be conveyed directly to you on an individual basis. Have a great weekend.

Markets are facing growing uncertainty as trade tensions, tariff concerns, and central bank signals weigh on investor sentiment. Estimating corporate earnings and assigning a fair P/E multiple has become increasingly difficult. In a strong economic environment with low inflation, low interest rates, and AI-driven growth, a P/E around 25 might be warranted. However, with slower growth, elevated rates, persistent tariffs, and stagflation risks—especially amid strained U.S.-China relations—a mid-teens multiple appears more appropriate. Tariffs now influence both earnings and valuations, distorting the broader picture. Adding to the pressure, Fed Chair Powell recently warned of potential conflict between the Fed’s dual mandates, likely hinting at stagflation, which triggered a market sell-off. The FOMC is expected to cut rates by 25 basis points on June 18, potentially setting the stage at its May 7 meeting. In contrast, the European Central Bank moved decisively, cutting rates and softening its language on policy, leading to a drop in the euro against the dollar. In this environment, it is important to remain focused on what matters: fundamentals and business quality.

Markets are closed today for Good Friday.

Happy Easter!