GUEST BLOG / By The Edward Jones Company's Quarterly Market Outlook: Second Quarter 2025.
Growth concerns have taken some wind out of the market’s sails, and high economic uncertainty is negatively impacting sentiment. Following 2025’s weak start, a rebound in gross domestic product (GDP) and a shift to pro-growth policies should help sustain the expansion, though at a slower pace compared with last year.
2Q ACTION FOR INVESTORS:
While the U.S. economy is downshifting, we expect the expansion to continue and recommend investors overweight equities over bonds. Edward Jones views Quarter One pullback as an opportunity to deploy capital rebalance and diversify.
What happened Q1:
Economy hits a soft patch in Q1 — After growing at an above-trend 2.8% pace in 2024, the U.S. economy appears to have hit a speedbump in Q1. Increased trade policy uncertainty has negatively impacted consumer sentiment, while winter storms in parts of the country also likely depressed activity. Additionally, a surge in imports will likely be a major drag in first-quarter GDP as U.S. companies sought to front-run any new tariffs. But growth should rebound in Q2 as this effect reverses, with imports slowing relative to exports.
Agenda may shift to pro-growth policies — So far this year, the focus has been on trade and efforts to constrain government spending. However, following the April tariff announcements, the administration may start shifting its attention to more market-friendly policies, which are taking longer to implement. Pro-growth policies, such as tax cuts and deregulation, have the potential to support growth and the budding recovery in manufacturing.
Steady labor market provides support — Consumers are showing some signs of fatigue, suggesting that overall growth will moderate this year. However, we do not expect an abrupt pullback in personal consumption, as the factors driving it remain supportive. Wages continue to grow faster than the pace of inflation over the past 22 months, and unemployment remains historically low. Government layoffs will apply some downward pressure on payroll growth, but federal employees account for only 2% of total employment. The private sector continues to add jobs above the 100,000–120,000 needed to keep pace with labor force growth and maintain a stable
For the full 2Q Edward Jones Company report GO TO: https://www.edwardjones.com/sites/default/files/acquiadam/2024-10/RES-10486AL-A-final.pdf
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