经济周刊：年中更新：不确定性中的弹性

William Blair The first half of this year has been a particularly volatileone for both the economy and financial markets. Presi-dent Trump came into office with a strong mandate forchange and has seemingly been doing everything hecan to live up to the promises he made on the campaigntrail—even though some of these changes have proved tobe highly controversial for large parts of the country andthe global economy. Yet, despite all of this, the economyhas so far proved resilient and defied earlier expectationsfor stagflation. Looking to the second half of the year,growth is likely to moderate, and the Fed will likely soonstart to lower interest rates, despite a possible uncom-fortable blip upward as the impact from tariffs is passedthrough to consumers.In thisEconomics Weekly, wepresent a midyear update, with a review and previewof the first and second halves of 2025. to get there. Thus, investors are perfectly capable of hedg-ing against those changes should they feel the need. Fiscal policymakers, conversely, are incapable of suchtransparency; decisions go back and forth between theHouse, Senate, and president. Politicians are less rationaleconomic technocrats and more actors responding totheir constituents and/or the election calendar. As such,these policymakers’ decisions might greatly benefit theirregion, though not always the economy as a whole. Theyoften have little understanding of financial markets andinvestors’ likely reactions to any policy changes. Theconsequential tax and spending decisions they make areoften hard to track and hedge against, and their economicimpacts are also often difficult to estimate. Treasury Secretary Bessent seems to fully understandthis transition and has been incredibly visible in acting astranslator in chief and attempting to bridge the uncer-tainty gap between policymakers in Washington and fi-nancial market players. President Trump, meanwhile, hasbeen forced to dance his own tango with markets, and onseveral occasions now, he has backed away from some ofhis most controversial policies where markets have beenreluctant to tread. This has been comforting for inves-tors, who now believe that there are effective guardrailsaround policy decisions. Fiscal Policy and Geopolitics—FollowingFirst-Half Shock and Awe, Markets NowMore Desensitized for Second Half As we have discussed previously, we believe a major re-gime change has been taking place since 2020. While thisdid not begin with President Trump, it has been amplifiedby him. In this new regime, fiscal policy has become a much moreimportant driver of economic change, and monetary poli-cymakers have found themselves on the back foot. Theyare no longer able to act preemptively. Instead, they arehaving to be reactive to highly consequential decisionsmade in Washington about taxes and spending, immigra-tion and deportations, tariffs, the DOGE, and geopoliticaldecisions that impact commodity markets directly andother areas of the economy indirectly. Hence, if the first half of 2025 with this new administra-tion was all about moving fast and breaking things, andthrowing as much as possible at the wall in an effort tooverwhelm and blindside any opposition, it seems thatthis phase is now over. The president has apparently dis-tanced himself from the tech bros, Elon Musk has acrimo-niously departed the White House, and the opposition isnow mobilizing—various policies are being tested in thecourts, and some have been reversed. For financial market participants, this shift in policydrivers creates greater uncertainty and, in turn, height-ened volatility. As a result, we should expect less shock and awe throughthe second half of this year and beyond as thoughts startto shift toward the 2026 midterm elections. While thepresident seems to still like a little drama and to thrivewith instability, investors have also become slightly moreaccustomed to this new dance partner, and in the processhave become a little less sensitive and knee-jerk reaction-ary to each twist and turn made by the White House. The Fed has spent the last few decades attempting to in-crease its transparency and thereby smooth any potentialmarket volatility associated with policy changes, in whathas become a well-honed symbiotic tango with inves-tors—their signals nudge investors in one direction or an-other, and they have become much more adept at sensingwhich direction markets are willing or unwilling to take. Meanwhile, financial market participants understand thetools that monetary policymakers are using, and they gen-erally recognize the direction of travel and timing needed Meanwhile, hard data through May—which include dataon retail sales, industrial production, factory orders, andemployment—show that growth has indeed started tosoften, and this moderate deceleration will likely con-tinue through the third quarter. Economic Growth—If the First Half WasAbout the Soft Data, the Second Half WillBe About the Hard The immediate response from both the co