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THE FEDERAL RESERVE MEETING:
Jerome Powell has decided to hold rates steady at their Federal Funs Rate of 4.25%. They anticipate one to two rate cuts this year, if everything continues as expected.
TARIFF CONCERNS:
Most economists agree that Tariffs are harmful to the economy, to the stock market, and to consumer confidence. Generally, when volatility increases – companies scale back, people spend less, and stock prices fall. Trump believes that short term difficulty is the only path to long term prosperity, even if there’s turbulence in the near future:
RECESSION FEARS:
When you look at the most recent estimates, there’s a chance that a recession could officially happen in 2025. For instance, the Atlanta Federal Reserve estimated that “first-quarter GDP may decline by an annualized adjusted rate of 2.4%, which would be the first contraction since 2022.” On top of that, JP Morgan put their “current recession odds at 40%, owing to extreme US policies.”
The counter-argument is that – so far, job growth is resilient, stocks are still up from where they were, a year ago, and abnormally cold weather could be partially responsible for a lack of consumer spending. However, all of this IS occurring during a time when people are falling behind on credit card and auto payments, more Americans have become pessimistic about the future of our economy, and even Trump said: “We’re in a period of transition.”
INFLATION IN 2025:
The most recent inflation report came in at 2.8% year over year, which is lower than the prior month, but higher than their long-term expected average; the largest price increase came from eggs, which rose nearly 60% from a year ago. In fact, ‘food away from home’ – like restaurants and full-service meals, were up 3.7% in the last year, and other items – like car insurance – increased by 11.1%, car repairs went up by 7.9%, apparel is up by 7.5%, and Shelter is up by 4.5% – which, is actually the lowest increase since December 2021.
MY THOUGHTS:
I think we really have to reduce our expectations when it comes to these ‘recent proposals’ and ’tariff concerns’ – like, let’s start with this one: NO TAXES IF YOU MAKE UNDER $150,000 PER YEAR.
Realistically, the chance of this passing is pretty slim to nonexistent – I found this thread from The Money Cruncher super helpful: He clarifies that people making under $150,000 per year contribute $330 billion dollars a year towards income tax – but, in order to maintain equality across all income groups, you would have to increase the base deduction to $150,000 – or at least have some phaseout range. That way, the first $150,000 anyone earns is tax free, regardless if you make $100,000 or $151,000 – which drives up the cost significantly:
https://x.com/money_cruncher/status/1900325594744971311?s=42
The same thing goes with the $5,000,000 ‘Gold Card’ that would allow anyone to buy US Citizenship:
Most likely, the bare minimum to even consider spending $5M is likely to require a net worth of at LEAST $10 million – of which, most of those people already live in the United States. At $30m net worth, here’s only 376,000 people outside of the United States that meet this criteria.
Most likely, anything that gets discussed is going to get watered down through congress – many things get over-promised – the tax breaks we’re likely to see are going to be a lot more conservative than the headlines being thrown around – and tariff concerns are likely going to result in a back and forth negotiation that will turn out to be a lot less than people expect.
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