Tariffs, Stagflation Jitters, and a Fed Pivot

Newsletter — September 2025

Dear Clients and Friends,

The economic landscape in late 2025 points to a mild slowdown, tariff-driven stagflation, and an upcoming Federal Reserve easing cycle, fostering a potential increase in volatility, especially in Big Tech. We expect Fed rate cuts starting in September, supported by anchored inflation expectations, bolstering equities but requiring caution. Manufacturing surveys show rising prices with slowing activity and employment, signaling temporary stagflation from tariffs. Markets remain resilient, with the S&P 500 near highs, stable 10-year Treasury yields, and strong Mag 7 performance. This mirrors past technical slowdowns, with modest S&P 500 drawdowns and relatively mild adverse impact on economic growth.

Key Indicators Suggest Low Recession Risk:

• Employment: Stalling, not collapsing, with AI potentially offsetting labor supply constraints.
• Macro/Profits: Mixed signals, but 2nd quarter earnings are stronger than expected.
• Liquidity: Growing money supply, low delinquencies, and ample corporate bond issuance.
• Capital Markets: Optimistic, with minimal recession pricing.
• Fiscal Policy: Uncertainty reigns; however, adding some benefit to economic growth from the One Big Beautiful Bill Act (OBBBA).

Key Risks:

1. Stagflation: Likely temporary; only 10% of core personal consumption expenditures (PCE) are import-related.

2. Financial Instability: Unlikely to happen within an easing cycle; private credit and crypto have some risk in this environment.

3. Housing: Expensive but supported by low supply and fixed-rate mortgages.

Investment Strategy:

Remain steadfast within long-term investment policies. Diversification remains important across and within asset classes, adding downside protection where you can, but also taking advantage of volatility when it spikes and being opportunistic and future focused.

Please feel free to schedule a review of your portfolio or discuss any questions you may have. Thank you for your continued trust and confidence.

Sincerely,

Eric Boyce, CFA

President & CEO

Forward-looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information.

Risks: All investments, including stocks, bonds, commodities, alternative investments and real assets, should be considered speculative in nature and could involve risk of loss. All investors are advised to fully understand all risks associated with any kind of investment they choose to make. Hypothetical or simulated performance is not indicative of future results.

Investment advisory services offered through Boyce & Associates Wealth Consulting, Inc., a registered investment adviser. Boyce & Associates Wealth Consulting, Inc. has Representatives Licensed to sell Life Insurance in TX and other states.