Paragon Perspectives: December Insights
Executive Summary
- The U.S. economy is ending 2024 on a strong note, with steady growth and inflation remaining manageable.
- Financial markets have delivered impressive returns, fueled by record-breaking corporate earnings and resilient business performance.
- President-elect Trump’s proposed tariffs have sparked discussions about their potential impact on the economy and trade dynamics.
- This month, we analyze economic and market highlights, unpack the tariff discussions, and provide insights on the potential implications for 2025.
As we close out the year, it’s a good time to reflect on the economic and market trends shaping the current landscape and what might be on the horizon. Think of it as the financial version of flipping through your favorite year-end magazine with less celebrity gossip and more GDP numbers. In this week’s Paragon Perspectives, we delve into the robust economic backdrop, examine the impressive performance of financial markets, and address some of the questions we’ve received about the potential impact of President-elect Trump’s proposed tariffs. Let’s dive into the numbers and explore how these dynamics might affect your financial future.
Economic Backdrop
The U.S. economy is showing surprising strength as we wrap up 2024. Economists estimate GDP growth for the fourth quarter at a solid 3.3%. In simpler terms, the economy is running pretty well—not “Ferrari on a racetrack” fast, but definitely “SUV in the left lane” steady.
Inflation, while still present, remains manageable. The annual inflation rate rose slightly to 2.7% in November, up from 2.6% in October. This increase was largely driven by higher food costs and shelter prices, with the monthly Consumer Price Index (CPI) climbing by 0.3%. Despite this uptick, inflation remains well below the highs of recent years, and the Federal Reserve’s rate cut expectations for 2025 have diminished due to stronger-than-expected economic growth and robust employment numbers.
Recent Market Performance
Markets have been in a giving mood this year, and unlike your Aunt’s fruitcake, these returns are something to celebrate:
- The S&P 500 is estimated to have delivered an impressive 27% year-to-date (YTD) return, showcasing the strength of the equity market.
- The U.S. Aggregate Bond Market has also performed positively, with a modest but steady return of approximately 3%.
Corporate America is thriving. Companies in the S&P 500 reported record revenues and earnings in Q3, with profit margins reaching healthy levels. Revenue growth was notably strong, outpacing historical averages, and earnings growth exceeded analysts’ expectations by a wide margin. These results highlight the resilience of U.S. businesses, even in a challenging global economic environment.
The Tariff Question: Trump 2.0
With President-elect Trump gearing up for a second term, tariffs are back in the spotlight. Clients have been asking us, “What does this mean for the economy?” Here’s the scoop:
Proposed Tariffs
- 25% Tariff on Imports from Canada and Mexico: Intended to pressure these countries to curb illegal immigration and drug trafficking.
- 10% Additional Tariff on Imports from China: Targeted at combating the influx of drugs, particularly fentanyl.
- 10%-20% Tariff on All Imported Goods: A broader measure to protect domestic industries and address trade deficits.
- 60% Tariff on Chinese Imports: A more aggressive proposal to counter perceived unfair trade practices.
A Look Back at Trump’s First Term
During his first term, Trump employed tariffs as a negotiation tool to push trading partners into making concessions. While the threats were often severe, the actual tariffs imposed were typically less extreme, such as those on steel and aluminum. This strategic approach allowed the administration to apply pressure without causing excessive economic disruption. For example, the U.S.-China “Phase One” trade deal secured commitments from China without fully implementing the most drastic measures.
Looking Ahead: Tariffs and Inflation
Could Trump’s tariff strategy avoid triggering a major inflationary wave? The answer depends on several factors:
- Proven Leverage Tool: Trump’s history of using tariffs to negotiate trade deals suggests he may follow a similar playbook. Threats of high tariffs often brought trading partners to the table without necessitating their full implementation.
- Flexibility in Execution: Selective application of tariffs and delayed implementation could mitigate their economic impact.
- Strong Dollar Advantage: A robust dollar could offset some of the cost increases associated with tariffs, reducing their inflationary effect on imported goods.
If Trump employs a balanced approach—mixing threats, selective implementation, and negotiation—he could achieve policy goals without causing significant inflation. However, success will hinge on careful execution and the broader economic environment during his presidency.
Final Thoughts
As 2024 comes to a conclusion, we remain optimistic about the resilience of the U.S. economy and the strength of financial markets. While uncertainties around tariffs and trade policy persist, history suggests that measured and strategic approaches can lead to favorable outcomes. As always, we’re here to help you navigate these developments and ensure your financial plan remains aligned with your goals.
Thank you for trusting us with your financial future. Here’s to a prosperous year ahead—and may your portfolio grow as steadily as my weight during the holidays!
About Ricardo
Ricardo J. Ferreira is the Portfolio Manager at Paragon Wealth, a firm he co-founded with Charlie McNamara, III, and Phil Rosenau. With a passion for finance and a talent for solving complex financial challenges, Ricardo leads the firm’s investment strategies, ensuring clients receive personalized and forward-thinking solutions.
A decorated U.S. Navy Veteran, Ricardo served at N.A.E.S. Lakehurst and aboard the USS George Washington, where he worked in aviation support. After his military service, he studied economics at Liberty University and began his financial career at Prudential Financial, where he met his future partners, Charlie and Phil.
Outside of work, Ricardo enjoys spending time with his family. He is married to Tina, owner of Main Street Accounting & Tax, and they have two children. Active in his community, Ricardo participates in various local events and serves on the finance council at St. Jude Parish in Chalfont. A passionate runner, he can often be found competing in local 5k and trail races on the weekends. To learn more about Ricardo, connect with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Any securities mentioned here are for informational purposes only and are not recommendations to buy or sell any security.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that the strategies promoted will be successful.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Paragon Wealth Management and Great Valley Advisor Group are separate entities from LPL Financial.
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