I will start this month's column with a forecast: The roller-coaster ride is not over.
I have taken a hard look at the recent data, analyzed the predominant trends and can state with an elevated level of confidence that the market and economic gyrations resulting from the policies initiated by the Donald Trump administration will extend at least into the next few months. And there is a rising possibility the commotion will persist much longer than that.
That does not feel like a particularly difficult forecast to make at this time, but it is the best I can do. What happens over the next few quarters will likely be highly disruptive, but it will not be random or chaotic. Events will follow a deterministic path, meaning the trends in the economic and market data will unfold in a manner determined by preceding events.
But that does not mean these trends are predictable. There are too many variables. Some are ones we can anticipate but not measure — the known unknowns. And there are likely to be others we have not even thought about — the unknown unknowns.
That's why, for the past three months, I have been even more vigilantly focused on the economic data than usual — not because I think I will be able to better assess near-term trends by looking in the rearview mirror. That is my usual modus operandi, but that approach simply will not work in the present volatile conditions. I have to adapt.
Therefore, I am hyperfocused these days because at some point in the not-too-distant future, I expect to learn something — perhaps something profound — about the American economy. From my perspective, this is a giant economic experiment. It may be expensive. It may even be painful.
But my objective is to come out on the other side smarter and wiser than I am now. I did not ask for this experience, but I am getting it, and I want to make sure I do not miss the lesson by deluding myself into thinking I knew all along what was going to happen.
One possible outcome of the recent tariff policy — whatever that policy actually turns out to be — is an increase in the rate of inflation. The potential connection between inflation and tariffs has been widely analyzed and reported. Because of this potential connection, I want to make sure I have a good understanding of what the data on inflation was doing before tariffs started to affect it.
According to the latest report from the Bureau of Labor Statistics, the Consumer Price Index for March decreased by 0.1 percent after seasonal adjustment. The 12-month rate of inflation fell to 2.4 percent in March, down substantially from 2.8 percent in February. These figures are better than expected, and if the goal of the Fed is to get the long-term rate closer to 2 percent, then declines of a tenth of a percent per month will get them there quickly.
A 6.3 percent drop in the price of gasoline was a major factor pushing the overall figure down in March. The price of shelter — one of the categories pushing prices higher recently — advanced just 0.2 percent last month.
Tariffs are widely expected to have a significant impact on the auto industry, but in March, new vehicle costs rose by a modest 0.1 percent. Used car prices dropped 0.7 percent. Food prices saw another strong rise in the cost of eggs, which climbed 0.4 percent and put upward pressure on the overall figure.
My reading of the graph is that the overall trend in the rate of inflation in the first quarter of 2025 was downward — getting gratifyingly close to the target rate near 2 percent. Without the uncertainty caused by the tariff policy, this trend would indicate the Fed could resume lowering interest rates in the coming months.
More economic data from March and the first quarter will continue to arrive in the coming days. Aside from daily financial market reports, we will not receive the usual economic indicators for April for several weeks.
This is not really time to hammer out meaningful trade deals with countries willing to negotiate, nor is it time for the effects of tariffs at any level with any country to fully appear in the prices consumers pay. The situation with China is still a wild card. And I cannot ignore the possibility that all of this might go away overnight.
But regardless of what happens next month — or in the next 90 days — I do not expect a return to business as usual. Many policies from the Trump administration have only recently been enacted, and more are under consideration. On top of this, major policy responses from other large global economies are likely.
And what about Congress? Will it begin generating fiscal policies that affect how Americans allocate their resources?
The president, Congress and China — any one of these could cause significant disruption to the U.S. economy. In other words, I believe the "period of transition" is far from over. It's likely some of this disruption will benefit sectors of the U.S. economy, including segments of the plastics industry.
But some segments will likely suffer. One area I'm watching, which hasn't been covered much recently, is the U.S. housing market. Will tariffs, interest rates or other policy directives be a factor? We'll find out as we head into the spring and summer months.
The long-term net effect of an ultradominant executive branch is still to be determined. I'm determined to keep my eyes — and my mind — open to all effects, both good and bad.