In today’s Steady Investor, we look at key factors that we believe are currently impacting the market, and what could be next such as:
The Fed Holds Rates Steady, Sees Slower Growth and Higher Inflation – The Fed did precisely what market participants were expecting. At its two-day policy meeting this week, the Fed opted to maintain its benchmark federal-funds rate in a range of 4.25% to 4.5%, as inflation’s downward progress has stalled and as elevated uncertainty stemming from recent policy changes has clouded the economic growth outlook. The Fed decision amounted to a “wait-and-see” posture, as more data is needed to see how inflation and growth trends may change in the coming weeks and months. In Chairman Jerome Powell’s words, “We do not need to be in a hurry to adjust our policy stance, and we are well-positioned to wait for greater clarity.” We tend to take Fed projections on the economy—and on the path of rates—with a grain of salt. Both are continually changing, and longer-term projects usually end up being off the mark. But it’s worth noting that the Fed lowered its GDP growth forecast for 2025 to 1.7% from the previously anticipated 2.1%, while expecting inflation to rise to 2.7%, primarily due to the impact of tariffs. The upshot is that inflation caused by tariffs can likely be ‘extracted’ from the component details, which would give Fed governors a clearer sense of underlying inflation trends. It could be that inflation ticks higher, but rates still come down, if the move higher in inflation is caused directly by tariffs and not structural forces in the economy. On the growth side of the Fed’s mandate, the decision to hold rates steady occurs against a backdrop of mixed economic indicators. While the labor market continues to exhibit steady hiring trends, consumer spending has shown signs of deceleration, suggesting a potential cooling of economic momentum. In response to these developments, the Fed has approved measures to slow the reduction of its asset portfolio, aiming to prevent potential strains in money markets and ensure sufficient liquidity within the financial system.1
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What the 1960’s-era “Chicken Tax” Teaches Us About Tariff Policy – For those who support tariff measures, the “chicken tax” may provide a useful case study. In 1964, the United States implemented a 25% tariff on imported light trucks, a measure known as the “chicken tax,” in retaliation against European tariffs on American poultry. The chicken tax effectively shielded domestic truck manufacturers from foreign competition, compelling international automakers to establish production facilities within North America to circumvent the tariff. This strategy ensured that popular models, such as pickup trucks, were produced domestically, thereby avoiding the substantial import duty. That’s the constructive argument for the tariffs. On the negative side, while the tariffs preserved some domestic manufacturing jobs, it also limited consumer choices and kept prices of certain vehicles higher than they might have been in a more competitive market. Moreover, some companies resorted to creative measures, known as “tariff engineering,” to bypass the tax. For instance, vehicles were imported as passenger cars and later modified into trucks to evade the tariff, highlighting the lengths to which manufacturers would go to mitigate its impact.3
Home Sales in the U.S. Rise Unexpectedly – The U.S. housing market has been in the doldrums for the better part of two years, but there have been bright spots. In February 2025, U.S. existing-home sales increased by 4.2% from the previous month, reaching a seasonally adjusted annual rate of 4.26 million units and widely surpassing economists’ expectations of a 3.2% decline. This rise marked the first increase in two months, attributed to buyers acclimating to current mortgage rates, despite ongoing affordability challenges and elevated home prices. The national median home price rose 3.8% year-over-year to $398,400, setting a record for February. Inventory levels increased by 5.1% from January and 17% compared to February 2024, totaling 1.24 million homes on the market. This data offers some signs of stability in the sector, but overall activity still remains subdued relative to previous years—especially those before 2023.4
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