Michael’s CIO (Check-It-Out) Report — events, sarcasm, and global macro reflections
March 25, 2025
THEME: NAVIGATING CROSSCURRENTS—Feeling queasy, yet?
SUMMARY: The current administration has triggered significant political, social, and market volatility, creating a challenging environment for business planning and investment strategy. Market jitters can compound on themself as fear takes hold. Despite these headwinds, several potential tailwinds exist, including peace negotiations in global conflict zones, lower oil prices to fight inflation, and proposed tax reforms that could stimulate consumer spending. This analysis examines the current market dynamics, portfolio positioning recommendations, and the strategic economic logic potentially driving administrative decisions ➡️ Nonetheless, the consumer, business, and labor markets are bifurcated, leaving the economy vulnerable.
DATES TO WATCH: April 2 for retaliatory tariffs, aka, Reciprocal Tariff Wednesday; May/June for debt ceiling cliffhanger; July/August for budget resolution which may push out to December; off-cycle gubernatorial elections in November; mid-term election in 2026—headlines aplenty🤦🏽♀️
Feel free to read this in order or jump around.
ECONOMY, AI, and CHAOS: Thank goodness the economy is strong, and we have AI to help keep improving productivity. Chaos theory normally describes the force applied by small events having an outsized impact on complicated systems. So, what happens when new currents are introduced? This describes what we are enduring, as financial and political mechanisms are the volatility ➡️ Markets hate change, and we are undergoing sudden transformation. Every administration steps into the White House with new people and new directions—it is a predictable pattern, yet perpetually unsettling to the markets📊
CHESS GAME ECONOMICS: What might we expect from an experienced second-term president? Maybe we are in the midst of a calculated economic maneuver—forcing the economy through turbulence early in the term—executing a metaphorical “360-degree hairpin turn” to allow for adjustment, then positioning for acceleration in years 2-4. While Machiavellian in approach, a controlled economic deceleration may prove less damaging than an unexpected recession? ➡️ The administration’s broader economic vision appears focused on revitalizing business and consumer activity while reducing federal spending. Proposed tax cuts on individuals and domestic manufacturing, coupled with immediate capital expenditure deductions, could stimulate business spending if consumer demand remains resilient—the resilience of the consumer being the linchpin of this theory. Higher disposable income resulting from these policies could offset inflation’s effects, even without directly addressing inflation itself💸
THE POLITICS: The stock and bond markets are seen as daily scorecards for the administration and the post-election market “honeymoon phase” is over. There’s a tension between traditional conservative economic policies (fiscal austerity, tax cuts, and deregulation) that markets favor and populist priorities (healthcare, tariffs, immigration reform, and government oversight) that creates market ambiguity ➡️ The general outlook remains very choppy, and additional downdrafts are likely, but eventually should head directionally up when interest rates decline.
DEEP POLITICS:
- Budget reconciliation will probably be one bill because House won’t be able to pass two bills with only a 3-seat margin
- Current law baseline vs current policy baseline (a new concept)—The intricacies of fiscal policy, ever evolving and occasionally perplexing
- State and local tax (SALT) deductions for corporations is on the menu for cutting as are carried interest deductions and other items; but also need to solve SALT cap issues for the republicans in California, NJ, and NY
- If Congress can solve the math problem on a policy baseline then the budget probably solves by July or August; there will be conversations to cut a deal with Chuck Schumer (Democrat, Minority Leader of the United States Senate) in the fall; maybe the topline Federal tax rate of 37% goes up to 39.6% in order to cut a deal?
DEBT LIMIT: On January 1, the debt limit expired. The government is probably good till May or June until it needs to deal with the debt limit again, and that will give Schumer leverage. Democrats probably won’t agree to raising the debt limit until they get something ➡️ Debt limit has to be raised, and it has to be done with at least 60 votes in the Senate. There is a high risk of brinksmanship over the debt limit. It is an anachronism that needs to go away so that it can’t be used as a weapon by either side🤺
DOGE is a wildcard with few precedents. It’s clear the administration is reshaping the federal government in ways that remain unresolved ➡️ If it reduces redundancies, streamlines processes, and improves efficiency, we shall see whether, in a Machiavellian sense, the end justifies the means
CHANGE O’ FOCUS: Investors have transitioned from hoped for tax and deregulation policy to confusion over tariff policy, immigration measures, and business planning. My best guess is that lower taxes—eliminating tax on social security benefits, tips, and overtime, which could lead to more spending—and increased deregulation down the road could inject enough confidence to help pull us out of a slump ➡️ The cheapest stimulus for an economy is confidence; it allows businesses and entrepreneurs to enter new markets, expand, outlay capital expenditures, and hire people. Right now, confidence seems to be missing🕵🏽
THREE DERAILERS: Amidst all the noise, there are three main derailers of sentiment and the economy to focus on; tariff confusion and implementation, an uptick in unemployment, and stretched consumer discretionary income (which may come into play regardless of unemployment levels). If increased production costs can’t easily be passed on given softening consumer strength, this is good for inflation but horrible for business margins ➡️ and that could drive unemployment up and stocks down
- TARIFFS: The market’s current bearish sentiment stems largely from fears that tariffs will derail economic growth and the manufacturing renaissance. The return to bullishness depends primarily on when tariff policies stabilize, giving businesses the predictable framework they need for planning ➡️ Once this uncertainty clears, we expect capital allocation decisions to resume and market momentum to regain a foothold. Reciprocal tariffs go into effect April 2—aka, Reciprocal Tariff Wednesday—that is THE date to watch! ➡️ The best outcome is a recognition that we can’t do tariffs through International Emergency Economic Powers Act (IEEPA) and have to do it through U.S. trade laws Section 232 or 301, everyone sees what will happen to whom, and countries make decisions to bring tariffs down ➡️ The bad outcome is if other countries retaliate and raise tariffs ➡️ If the retaliatory tariffs end up being narrow, targeted, and negotiable, the stock market may find a bottom↘️↗️↘️↗️
Note: We wrote over a year ago, in our CHINOMICS report of February 11, 2024 and reiterated in our Fed’s Love Language CIO Report of March 22, 2024, “Trumponmics: Trump claims he will consider a greater than 60% tariff on Chinese goods if elected,” with the caveat that consider is different than implement.
- UNEMPLOYMENT: Unemployment (up or down) tends to be trendy, i.e., unemployment (either positive or negative) tends to be a self-reinforcing cycle ➡️ People are hired, they spend more, business expand and hire more people; or people are laid off, they spend less, spending declines, businesses weaken, more people are let go.
- HIGHER DEBT and STRETCHED DISCRETIONARY INCOME: This is the case but has been slowly materializing over the last couple years. What has suddenly magnified it is a decrease in new job openings, an uptick in unemployment, and businesses reigning in spending.
SECONDARY TARIFFS have been added to the lexicon. These are novel tariffs threatened by President Trump on countries that trade with regimes that are under U.S. sanctions, e.g., countries that purchase oil and gas from Venezuela ➡️ The Trump administration is strategically employing tariffs and economic leverage—rather than financial sanctions which lead to de-dollarization—to pursue foreign policy objectives, generate revenue, and create negotiating pressure
GLOBAL MACRO, GETTING BETTER: For the last three years, the global-macro situation has kept everyone on edge. Russia invading Ukraine, Iran and Iranian proxies attacking Israel and western interests, saber rattling from North Korea, and fear of China invading Taiwan. But now, on the positive side, global-macro risk seems to be decreasing🌏
- Iran has lost some of its grip across Syria and Yemen ➡️ Trump wants an extension of Abraham accords to normalize relations between Israel and the Saudi/Gulf region
- Russia and Ukraine seem to be moving toward a brokered peace, the consequences of which will probably mean a relaxation of financial and trade restrictions against Russia and a massive opportunity to rebuild Ukraine, both of which should be good for European and American business ➡️ It also means that Russian trade with Iran for drones and machinery will probably decrease, further weakening Tehran’s alliances
- North Korea has been rather quiet of late
- China has shifted some of its war games to the Tasman Sea—the body of salt water between Australia and New Zealand—and Taiwan invasion fears have subsided for now; nevertheless, the current Administration seems to grasp that Beijing has developed formidable capabilities that enable it to keep challenging US hegemony/supremacy on the world stage
GLOBAL MARKET ROTATION: The current environment is driving rotation both within U.S. markets and outward to alternative investments including gold, bonds, European and Japanese equities, and emerging markets ➡️ Europe could benefit significantly if the Russia-Ukraine conflict resolves and trade normalizes, potentially revitalizing Germany, France, and Italy🌍
STOCKS: While inflation expectations remain elevated, the stock market isn’t the economy, and about half of all corrections don’t lead to a recession but prove to be restorative; sometimes the market just needs a good cry ➡️ But seriously, the decline in the wealth effect that has boosted overall consumer spending is a real concern!📉
THE FED PUT: Chairman Jerome Powell still heads the Federal Reserve and thankfully has done enough quantitative tightening (QT, the process of selling or letting government bonds mature off the balance sheet) and raised interest rates enough that the Federal Open Markets Committee (FOMC) has room to maneuver if unemployment ticks much higher or growth slows into recession territory.
DON’T FIGHT THE TREASURY: Treasury Secretary Scott Bessent has been talking down the yield on 10-year Treasury bonds and it seems to be working especially since he can limit the amount of 10-year bonds sold at auction (thereby driving up their price and lowering their yield). The subtle art of talking the market into doing what you want ➡️ Lower yields can help drive and finance the capital expenditures needed for domestic production, business expansion, and consumer consumption🛍️
AI: AI will contribute to important shifts in the future of education and work, increasing productivity as the cost of AI capabilities are falling by approximately 10x every 12 months ➡️ The new administration is fermenting change amongst importers, exporters, and manufacturers, but has done little to interrupt America’s pro-innovation approach👩🏽💻
MESSY: Don’t get me wrong, not everything is puppy dogs, rainbows, and unicorns. Trump, similar to his first term, is throwing ideas and statements out there to see what sticks ➡️ It is turbulent and chaotic, but in a strange way uncensored in that it is out there for everyone to judge rather than having it all happen behind closed doors🔮
CAUTION: Healthcare is ripe for administrative change—as well as AI disruption—many administrations have tried and failed. You can point to Obamacare, but that wasn’t a change of the healthcare system as much as it was an insurance coverage change. Any shuffling in defense spending is likely to be negative for incumbents and good for new entrants in drone (unmanned systems), artificial intelligence (AI), and distributed attack and defense systems ➡️ Expect increased alignment between the Pentagon and Silicon Valley. Defense spending is not going down, it’s going up. A $147 billion of weapons shipped to Ukraine has to be restocked—we drew out of reserves and stockpiles and have little left—and we must address China which is a bipartisan issue
GOING ABROAD: We are a little behind the eight-ball on this. International and Emerging Markets have done relatively well this year. Depressed investment themes for Europe and China have suddenly become engaging, thanks to improving fundamentals supported by aggressive fiscal policy and a possible peace dividend coming out of peace accords between Russia and Ukraine ➡️ We’ve been slowly increasing our international exposure through increased private secondaries and credit investments that have foreign assets. Trump claims he will consider a greater than 60% tariff on Chinese goods if elected—of course, consider is different than implement.
PRIVATES: In markets like this, Private Credit and Secondaries can be very opportunistic as fund managers can demand better pricing and/or stronger covenants and guarantees ➡️ Private investments are a diversification from the public markets
PUBLICS: Likewise, with the pull back of U.S. stock prices, they are starting to get more attractive and we will continue to monitor to potentially move some bonds or T-Bills into the US Market
RECESSION? Economically, although we don’t want to see a recession, a silver lining to this turmoil is that it is causing the yield curve to go down and may force Fed Chairman Powell to lower interest rates which should help troubled real estate refinance at better rates and possibly help save or put a floor under the commercial real estate market. A less-bad recession maybe?🤷🏽♂️
NOVEMBER: Watch for signals in November of this year as NJ and Virginia have off term gubernatorial races; Virginia is the one to scrutinize! Former U.S. Representative Abigail Spanberger, a moderate democratic will run and is likely to win. Virginia is a purple state trending blue ➡️ Watch how Spanberger messages around DOGE and DC cuts which could be something other Democrats copy in 2026. Her campaign will be used as a messaging test case by Democrats
2026: The Senate probably won’t change control in 2026. North Carolina could be a target and Maine if Susan Collins retires. On the flip side, Democrats are defending in Georgia, and Michigan is an open seat race as is Minnesota and New Hampshire which Chris Sununu could win ➡️ Republicans could pick up Senate seats—In the House, the Republican margin is three, and historically the average loss in the House to the incumbent party is 24. History tells you it will flip, but it might not this time because few districts are competitive
STATE OF THE STATES: It is not just about the federal government; don’t forget the states! There are 40 states with virtual trifectas of all red, all blue or super majorities in their state Congress. Thus, in 40 states it’s easier to pass rulings on DEI, ESG, labor, tax, and healthcare policy ➡️ So, while D.C. is bickering, the states are busy making their own patchwork quilt of rules that will lead to blue and red policies that create business friction for those corporations (i.e., nearly every company of size) operating across state lines. Prepare for a logistical nightmare!
OUTLOOK: As economic headwinds persist, the Federal Reserve may halt quantitative tightening and lower interest rates to support economic activity and reduce unemployment. While a recession remains possible—and the odds of it are increasing—historical precedent suggests such downturns often present advantageous buying opportunities for strategic long-term investors ➡️ Let’s hope that the administration is making difficult economic choices now to position for stronger growth later in its term. Though disruptive in the near term, this approach could potentially yield a more sustainable economic foundation if successfully executed
CONTENT
Minecraft: On April 4, two days after Retaliatory Tariff Wednesday, A Minecraft Movie will be released—any bets on whether it will be a Sonic, The Lego Movie, or The Super Mario Bros. Movie style hit, or a flop like Turning Red or Strange World?🤖
Whizbang: Google’s $32 billion Wiz acquisition is a high-stakes cybersecurity power play. They’re not just buying a company, they’re buying instant credibility in cloud security☁️ By allowing Wiz to remain platform-neutral, Google may cleverly sidestep antitrust concerns while gaining a cutting-edge security portfolio that can compete across multiple cloud environments ➡️ Hopefully this is a sign of more corporate acquisitions to come
Swoosh: Nike’s share price is at a more than five-year low ➡️ Just Do It has slowly become Undone as shoe-tech and novelty shifted to companies like HOKA, ON, and even Skechers👟
PERSONAL
Two new partners: Running Point proudly announced its two newest partners in the L.A. Business Journal: Brooke Sigler, CPA and Tax Partner as well as Daniel Kerr, CFP®👏🏽👏🏽👏🏽
Bloomberg: In recent weeks, we’ve twice been interviewed live on Asharq Business News with Bloomberg regarding our take on Federal Reserve policy, consumer sentiment, technology, and investment markets
OCMBA: Running Point sponsored the OCMBA 2025 Market Outlook, featuring Mark Kiesel, CIO of Global Credit at PIMCO, helping create community and foster investment discussion within Orange County
Tariff Tug-of-War: International Policy Digest interviewed us on tariffs as both a strategic tool and a double-edged sword, fostering domestic self-sufficiency while potentially stifling competition and innovation
Quoted: We were also recently been quoted by CBS News regarding gold, Reuters regarding President Trump’s Address to Congress and Nasdaq 24-hour trading, The Epoch Times about the U.S. Treasury Market, TheStreet about AI and Crunchbase, and much more here
You can also read this report on LinkedIn
Make it a great month ahead,
Michael
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Michael Ashley Schulman, CFA
Partner & Chief Investment Officer
Running Point Capital Advisors, “we are your family office”™️
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Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. This is not investment advice and this is not a recommendation to buy or sell a security. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-25-65
