Hope you are all doing well. U.S. stock indexes alternated between modest daily gains and losses and ended up slightly. Higher overall is a good sign in the wake of recent losses that sent the S&P 500 into correction territory the previous week. At Friday’s close, the S&P 500 index finished up 0.5% for the week and snapped a string of four weekly declines in a row. On Friday, we lost an all time great boxer and a man whose grill cooked me many meals in my early twenties, George Foreman. I have broken down this week’s update using some of his notable quotes.
“Evil lurks where disappointment lodges.” – George Foreman
Tech stocks have been terrible the past five weeks. It is easy to get discouraged, this can cause you to become more vulnerable to negative influence or actions. Like selling out of great companies because the doomsday pundits on television said so. The information technology sector and many of the Magnificent Seven group of stocks have led the U.S. market in recent years and should continue for the foreseeable future. They slightly lagged the broader market in the latest week, extending their tough year-to-date run. On a year-to-date basis, the tech sector was down more than 9%, in contrast with its nearly 37% gain in 2024. This should be viewed as a buying opportunity not a time to head to the exits.
“The referee is going to be the most important person in the ring tonight besides the fighters.” – George Foreman
Chairman Powell continues to be the referee in the fight between maintaining economic prosperity and price stability. Right now, the U.S. Federal Reserve is letting the combatants fight it out in the publicly traded markets. They stated they will continue to take a wait-and-see approach to the economic outlook as it again kept the benchmark interest rate unchanged. Policymakers maintained their consensus outlook for two rate cuts by year end, although the central bank negatively adjusted other expectations by reducing its economic growth rate forecast and pushing its inflation projection higher.
“The Internal Revenue Service is the real undefeated heavyweight champion.” – George Foreman
This is the time of the year where all of our attention shifts to taxes. Hopefully, Congress will also turn their attention to taxes as well. The 2017 Trump Tax Cuts, known as the Tax Cuts and Jobs Act (TCJA) has been beneficial for most Americans, not just the wealthy. It reduced average tax burdens for taxpayers across the income spectrum. It simplified the tax filing process through structural reforms. It also boosted capital investment by reforming the corporate tax system and significantly improved the international tax system. At the end of 2025, the individual portions of the Tax Cuts and Jobs Act expire all at once. Without congressional action, 62 percent of tax paying Americans could soon face a tax increase relative to current policy in 2026. The problem with extending the tax cuts is the price tag. The cost for extending the 2017 Trump tax cuts is 4.5 trillion dollars in lost tax revenue for the government. When the cuts happened in 2017 interest rates were near 0% which meant the government could fund tax cuts by taking on additional debt without long term implications. That is not the case this time. As a result, the administration needs to increase the tax base and reduce spending. I, like many hoped the administration would lead with tax cuts.
However, I am starting to see what appears to be the outline of a strategy. It would be wonderful if someone in the administration would articulate the strategy, so that there would be confidence that they are operating under a plan of action. In the absence of that we must look at the administration’s actions through the lens of funding the tax cuts first. Doing this makes things like DOGE (reduce expenses), the tariffs (bring more corporate funds and resources back into the U.S) , and the immigration gold card (expand top 1% of tax base) some context. If that is indeed the strategy then I am confident that after the tariffs take effect on April 2nd and this current round of DOGE reduction in force takes place at the end of April that the administration will shift its focus to the second wave of their agenda, tax cuts, deregulation, and oil production. That portion of the agenda should be well received by markets and bring stocks back closer to their highs.
Please use my calendar link below and schedule a phone or zoom appointment. I know this is a time of high anxiety for many of you. The calendar link allows you to schedule a call as early as the next day. I opened up additional hours and have been trying to speak to as many of you as possible. If you are concerned or need to speak to me please use the link and schedule rather than trying to reach me over the phone without an appointment or sending a multi bullet pointed email requesting to see various scenarios.
