• Menu
  • Skip to right header navigation
  • Skip to main content
  • Skip to secondary navigation
  • Skip to primary sidebar
  • Skip to footer

Before Header

Philadelphia Wealth & Asset Management Firm

wealth management

  • Why TBA?
    • Why Tower Bridge Advisors?
    • FAQs
  • Who We Serve
    • Individuals & Families
    • Financial Advisors
    • Institutions & Consultants
  • People
    • James M. Meyer, CFA® – CEO
    • Robert T. Whalen – Principal
    • Nicholas R. Filippo – VP, Sales & Marketing
    • Jeffrey Kachel – CFO, Principal & CTO
    • Chad M. Imgrund – Sr. Research Analyst
    • Christopher E. Gildea – Senior Portfolio Manager, Co-Chief Investment Officer
    • Daniel P. Rodan – Sr. Portfolio Mgr.
    • Christopher M. Crooks, CFA®, CFP® – Senior Portfolio Manager, Co-Chief Investment Officer
    • Michael J. Adams – Sr. Portfolio Manager
    • Shawn M. Gallagher, CFA® – Sr. Portfolio Mgr.
  • Wealth Management
    • How to Select the Best Wealth Management Firms
  • Process
    • Financial Planning
    • Process – Equities
    • Process – Fixed Income
  • Client Service
  • News
    • Market Commentary
  • Video
    • Economic Updates
  • Contact
    • Become A TBA Advisor
    • Ask a Financial Question
  • We are looking to add advisors to our team. Click here to learn more!
  • We are looking to add advisors to our team. Click here to learn more!
  • Click to Call: 610.260.2200
  • Send A Message
  • Why TBA?
    • Why Tower Bridge Advisors?
    • FAQs
  • Services
    • Individuals & Families
    • Financial Advisors
    • Institutions & Consultants
  • People
    • James M. Meyer, CFA – Principal & CIO
    • Raymond F. Reed, CFA – Principal
    • Robert T. Whalen – Principal
    • Nicholas R. Filippo – VP, Sales & Marketing
    • Jeffrey Kachel – CFO, Principal & CTO
    • Chad M. Imgrund – Sr. Research Analyst
    • Christopher E. Gildea – Sr. Portfolio Mgr.
    • Daniel P. Rodan – Sr. Portfolio Mgr.
  • Wealth Management
  • Our Process
    • Financial Planning
    • Process: Equities
    • Process – Fixed Income
  • Client Service
  • News
    • News & Resources
    • Market Commentary
  • Videos
    • Economic Updates
  • Contact
    • Become a TBA Advisor
    • Ask a Financial Question
wealth management

April 17, 2025 – The Trump administration’s trade and tariff plans aim to improve trade for American businesses, primarily through the use of tariffs. However, initial market reactions have been contrary to expectations, with a weaker dollar and rising interest rates creating economic uncertainty. Investors should brace for potential recession and stagflation risks with balanced portfolios and a patient approach to future investment opportunities.

//  by Tower Bridge Advisors

The Times They Are A-Changin’
This week, I want to talk about the Trump administration’s trade and tariff plans and what they could mean for the economy. In essence, the president is trying to change how we trade with other countries—and this has shaken the financial markets. Many of the ideas come from a 40-page paper entitled, “A User’s Guide to Restructuring the Global Trading System,” written in November 2024 by Stephen Miran, Chair of the Council of Economic Advisors.

Miran’s main point is that the U.S. dollar is too strong, and that hurts our ability to trade fairly. He says that because other countries use the dollar as a reserve currency—like their savings account—the demand for dollars stays high. As the world economy grows, it puts a bigger strain on the U.S. to provide those dollars and also pay for global security. This especially hurts American manufacturing because a strong dollar makes foreign goods cheaper—so companies move their factories overseas.

To fix this, Miran suggests using tariffs and changing currency policies. He argues that if tariffs are balanced out by a stronger dollar, then they won’t cause as much inflation or other problems. We saw this happen somewhat during 2018-19 when tariffs were put on China. In that case, the other country pays the price through reduced buying power, and the U.S. government gets more money. Miran also talks about how to set up tariffs and what the best rates might be. It’s clear that the Trump administration is using Miran’s paper as a blueprint.

Without getting into all the details of the paper, Miran looks at ways to address other countries whose currencies are too weak and what the financial effects of these policies might be. He thinks tariffs are a simpler tool, and since they’ve been used before, they’ll likely be used first. Changes to the dollar are more complicated, so they’ll probably come later, after tariffs. He stresses that any changes need to be made slowly and carefully to avoid big market swings. It looks like tariffs are just the first step in a bigger plan.

However, things haven’t gone exactly as planned thus far. First, the U.S. dollar has actually gotten weaker, not stronger. Miran’s paper says a stronger dollar helps keep prices down when tariffs go up. Second, the interest rate on 10-year U.S. Treasury bonds has gone up since the tariffs were announced. This is the opposite of what the administration wants. Higher interest rates make it more expensive for people and businesses to borrow money, which can slow down the economy.

A Hard Rain’s A-Gonna Fall
Looking ahead, the path remains uncertain. Forecasting market direction is complicated when political decisions, rather than underlying economic trends, are the primary drivers; for instance, a single high-level communication between U.S. and Chinese leaders could significantly alter the outlook. In the absence of a comprehensive global agreement, the ongoing reshaping of international trade relationships continues to present both distinct risks and potential opportunities.

Following the policy direction of the Trump administration, reputable economists observed that the probability of a U.S. recession stood at approximately 50/50. The most significant risk identified was stagflation—a scenario characterized by persistently high inflation coinciding with slowing economic growth. Should yields on the 10-year US Treasury rise toward 5%, the Federal Reserve might need to intervene through bond purchases to manage or cap yields. Such a situation could also necessitate substantial cuts in U.S. government spending to decrease the amount of borrowing required.

The trend and absolute level of the 10-year US Treasury yield carry exceptional weight, particularly given the magnitude of U.S. national debt (exceeding $36 trillion, or roughly 130% of U.S. GDP—a ratio considered by many economists to be near a sustainable limit). Rising interest rates inevitably increase debt servicing costs, consuming a larger share of the federal budget. Furthermore, an economic recession would likely reduce government tax revenues, thereby increasing the deficit significantly.

Foreign entities hold approximately 25% of outstanding U.S. debt securities. A potential challenge for the U.S. involves the risk of these holders diversifying away from dollar-denominated assets, including government bonds. Concentrated selling of U.S. debt within a short time frame would exert downward pressure on bond prices, consequently pushing interest rates higher. This contributes to the ongoing debate regarding the U.S. dollar’s continued reliability as a safe “store of value.” Ultimately, investors should remain prepared to navigate various potential scenarios.

Near Term Outlook
My best guess is that the uncertainty surrounding tariff and economic policy will cause an initial surge in consumption, followed by a pullback. Companies that report early during earnings season (i.e., this week) will have less insights to share than those that report later since the surprise tariff announcement occurred on April 2. In fact, United Airlines just released their outlook yesterday and noted that the macro environment is “impossible to predict this year with any degree of confidence.”

Even without entering a technical recession, GDP growth is likely to decelerate under these conditions. People are more worried about their job security today than they were three months ago. Layoffs will likely rise and the unemployment rate is projected to rise modestly as the year progresses. Moreover, mortgage rates remain high, near 7%. So, it is unlikely the housing market will be a source of strength.

When interest rates and earnings growth rates change abruptly, the stock market usually follows with an adjustment period of its own. We are enduring that process now. Balanced portfolios have performed well and mitigated some of the declines that have been led by technology stocks. Maintaining an appropriate asset allocation is the best way to weather the storm.

For the past couple of years, stocks have been trading near peak valuation multiples using a variety of metrics. Market selloffs create opportunities for investors who have cash and patience. Great companies will make the necessary adjustments to deal with whatever new global trading system evolves. We expect to add some of these great companies to portfolios as the year unfolds, but being patient until the dust settles a little more is our best advice right now.

Christopher Gildea 610-260-2235

Tower Bridge Advisors manages over $1.3 Billion for individuals, families and select institutions with $1 Million or more of investable assets. We build portfolios of individual securities customized for each client's specific goals and objectives. Contact Nick Filippo (610-260-2222, nfilippo@towerbridgeadvisors.com) to learn more or to set up a complimentary portfolio review.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request. This report is not a complete analysis of every material fact representing company, industry or security mentioned herein. This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned. This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities. The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed. This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized. Opinions are subject to change without notice.

Filed Under: Market Commentary

Previous Post: « April 14, 2025 – The tariff roller coaster ride continues as Trump exempts some tech products made in China from tariffs but warns that secular tariffs on semiconductors are likely soon. While bond yields this morning are slightly lower, the dollar continues to weaken as the world continues to adjust to economic chaos in this country. While the tariff extremes of Liberation Day may be reduced over the next several months, they still appear likely to be the highest in close to a century, a clear tax on the U.S. economy. Wall Street’s mood can change daily depending on the tariff announcement du jour but until markets can determine a rational logic behind the Trump economic game plan, volatility will remain elevated.
Next Post: April 21, 2025 – Tariffs raise barriers that make imports less desirable. They serve to reduce the balance of payments. But by protecting local producers of higher cost goods, they are inflationary. The attendant decline in the value of the dollar chases investment capital away, capital necessary if reshoring of manufacturing is going to be achieved. The goal of the Trump administration should be to find the balance that favors U.S. manufacturers but retains investment capital within our borders. So far, markets suggest that dilemma hasn’t been resolved. »

Primary Sidebar

Market Commentary

Sign Me Up!

Latest News

  • May 30, 2025 – Amidst a volatile market, significant economic risks such as high interest rates and trade policy are creating a tense environment where stock market gains may be capped. Key sectors, like housing, are already showing signs of strain from elevated rates, while the bond market remains turbulent. Therefore, a diversified and defensive investment strategy is recommended, emphasizing fundamental analysis and valuation discipline for stocks while holding high-quality bonds to navigate the expected volatility.
  • May 27, 2025 – The House has passed Trump’s big beautiful bill and moved it on to the Senate. It’s a budget buster that offers something for all but will expand deficits meaningfully. It’s a bit of a mess that can be fixed if the Senate has the backbone to fix it. Wall Street will be watching, especially bond investors.
  • May 22, 2025 – Memorial Day Weekend is typically the unofficial start of summer for many. However, this year has been anything but typical. Corporate earnings have been holding up based on recent company reports and outlooks. Tariffs have dented a few earnings reports, but the consumer continues to spend. Credit spreads are not indicating a recession yet, although interest rates have been on the rise as Congress works on a spending resolution bill. Markets gave back some of their recent gains yesterday but are still only about 5% from their all-time highs. Not quite bear market territory. Anyone traveling this weekend to a national park should remember to bring their bear spray.
  • May 19, 2025 – Stocks have clawed back all their post-Liberation Day losses as the perceived impact of tariffs have lessened. But now comes the hard part. Whatever tariffs are imposed will have economic consequences that we are only just starting to see. The big tax bill as originally proposed is a budget buster. 10-year Treasury yields are now back above 4.5%. With hindsight equity investors overreacted after Liberation Day. The subsequent rally may have gone too far as well.
  • May 15, 2025 – Following a big rebound, the S&P 500 is flat YTD but trades at a high valuation of 23x forward earnings. Consumer spending faces headwinds from rising student loan defaults and a cooling housing market. While recession fears have eased, the economy is slowing and inflation trends remain uncertain.
  • May 12, 2025 – China and the United States have agreed to reduce tariff rates on each other by 115% leaving our tariff rate on Chinese goods at 30%. Since shortly after the shock of Liberation Day that sent equity investors into panic mode, there has been a gradual retreat from an overbearing tariff framework outlined that day. Today’s suspension of tariffs, pending further negotiations may not be a final step. But it comes right out of the Trump playbook that shoots for the moon first and then settles into a much more compromised reality later. While tariff negotiations continue not only with China but the rest of the world, investors can now focus on the next leg of the Trump agenda, tax cuts.
  • May 8, 2025 – The Federal Reserve on Wednesday held its key interest rate unchanged in a range between 4.25%-4.5% as it awaits better clarity on trade policy and the direction of the economy. While uncertainty about the economic outlook has increased further, the Fed is taking a wait and see stance toward future monetary policy. Meanwhile, the S&P 500 Index has just about fully recovered its losses following the April 2nd “Liberation Day” when major tariffs were announced on U.S. trading partners. The bounce in risk assets is welcome, but we are still looking for white smoke signals showing that progress on inflation and tariffs is being made.
  • May 5, 2025 – Investors overreacted to Trump’s early tariff overreach but may have gotten a bit too complacent that everything is now back on a growth path. While there are few signs of pending recession, the impact of tariffs already imposed are just starting to be felt. So far, no trade deals have been announced although the White House claims at least a few are imminent. The devil is always in the details. Congress will start to focus on taxes. Conservatives may balk but there is little indication to suggest they won’t acquiesce to White House pressure once again.
  • May 1, 2025 – U.S. GDP unexpectedly contracted by 0.3% in the first quarter, the first decline since 2022, largely due to a surge in imports ahead of anticipated tariffs. Despite this GDP contraction, major tech companies like Alphabet, Microsoft, and Meta reported quarterly earnings, indicating continued strength in areas like advertising and cloud computing. However, concerns remain about the broader economic outlook due to uncertainty surrounding tariffs, potentially leading to higher prices, weaker employment, and a challenging environment for the Federal Reserve regarding inflation and interest rate policy.
  • April 28, 2025 – Markets rallied as the Trump Administration suggested tariffs might be reduced against China and that ongoing negotiations with almost 100 countries are progressing, although no deals have yet to be announced. But even with tariff reductions, the headwind will still likely be the greatest in a century. So far, the impact is hard to measure as few tariffed goods have reached our shores. Early Q1 earnings reports show little impact through March, although managements have been loath to predict their ultimate impact. Stocks are likely to stay within a trading range until there is greater clarity regarding the impact of tariffs.

Footer

Wealth Management Services

  • Individuals & Families
  • Financial Advisors
  • Institutions & Consultants

Important Links

  • ADV Part 2 & CRS
  • Privacy Policy

Tower Bridge Advisors, a Philadelphia Wealth and Asset Management firm, is registered with the SEC as a Registered Investment Advisor.

Portfolio Review

Is your portfolio constructed to meet your current and future needs? Contact us today to set up a complimentary portfolio review, using our sophisticated portfolio analysis system.

Contact

Copyright © 2023 Tower Bridge Advisors

Philadelphia Wealth & Asset Management, Registered Investment Advisors

300 Barr Harbor Drive
Suite 705
West Conshohocken, PA 19428

Phone: 610.260.2200
Toll Free: 866.959.2200

  • Why Tower Bridge Advisors?
  • Investment Services
  • Our Team
  • Wealth Management
  • Investment Process
  • Client Service
  • News
  • Market Commentary
  • Economic Update Videos
  • Contact