Most indicators moving in the right direction
Lately the news on the economy and the early results of the Trump Tariffs has been highly surprising and very good. Here’s a quick rundown of what we are seeing across the economy – GDP, labor, tariffs and trade.
Consider the following:
Wall Street Journal, December 23, 2025
“Defying Dire Predictions” is the important part of this headline. The story reported a surprising 4% growth in the 3rd quarter of 2025. Most estimates were below 3%.
We mentioned the Atlanta Federal Reserve’s “GDP Now” service in November (The 7 Minute Economist). The chart below shows that they believe growth in the 4th quarter of 2025 will be much higher than expected. They increased their estimate from less than 3% to over 5% last week.
These high growth rates are expected to continue in 2026.
Another important surprise in the 3rd quarter was a big jump in labor productivity, as the chart below illustrates. Gains in productivity usually result in increased average wages and company profits. Stay tuned.
Then there were the tariff worries. “Worries” understates it. There was a full-blown panic early in the year about tariffs. First, there was the concern about prices. See below for the latest WSJ headline on that subject.
Wall Street Journal, January 6, 2026
There were also worries about world trade and even predictions of a worldwide recession due to higher tariffs. Trump’s tariffs were often compared to the Smoot-Hawley tariffs that kicked off the Great Depression.
However, the chart below is further evidence that world trade kept growing. In fact, for the first time in many years, European and Emerging Market stocks had a banner year. Worldwide stock markets wouldn’t be up this much for 2025 if another tariff-induced Depression was on the way.
But what about the US trade picture? As the chart below shows, we enjoyed the lowest trade deficit in the last 10 years. In fact, you need to go back to 2009 to find a smaller trade deficit.
Again, “Defying Dire Predictions.”
We agree with those who expect more of the same in 2026. No recession in the US, and no trade war abroad.
Always remember that scary headlines get more clicks on the Web and more time watching cable news. The news business isn’t your friend if you own stocks.
Best regards,
Daniel A. Ogden
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