We are halfway through summer already and economic uncertainty remains prevalent this year for consumers, taxpayers and investors.
Consumers are fighting the inflation the government says we don’t have. This is causing a slowdown in high-end spending as more of us need to shift to necessities that always seem to cost more and never go down in price. Inflation is a major concern, with the expectation it will remain elevated and could peak in the third quarter. Tariffs are a key factor in keeping prices high. This may cause the Federal Reserve to remain cautious, holding rates steady for fear lower rates will increase inflation. The Fed needs to balance the need to control inflation with the potential for an economic slowdown.
Reduced spending contributes to slower economic growth. Real gross domestic product (GDP) is expected to slow to a range of 1.3% to 1.9%.
The labor market, while currently healthy, is starting to show signs of potential weakening with a rise in initial unemployment claims and declining federal government employment. Job growth is expected to slow.
The overall economic cycle is impacted by tariffs and the uncertainty around future trade policy along with global tensions in the Middle East and Ukraine.
Investors are observing all of this uncertainty with a wary eye, even after we had a pullback earlier in the year, which brought some valuations down. The stock market does not like uncertainty and there are plenty of unknowns going into the second half of 2025.
In essence, July finds the economy in a delicate situation, with declining growth, uncertainty around trade policy and potential shifts in inflation.
Taxpayers will need to decipher the new tax bill (One Big Beautiful Bill Act). It still could make sense to consider pushing income, capital gains and even Roth conversions into this tax year, depending on how the changes will affect you.
Financial advisers warn that economic conditions are never perfect, and it is futile to predict geopolitics or any key economic indicator. Therefore, it is crucial to update your financial plan each year to be balanced according to your risk appetite and time frame. Keeping your plan current allows you to be more flexible when there are shifts you may want to take advantage of.
Economists are still on the fence regarding recession. There is a recognized risk with low probability ranging from 28% to 40%. A tighter labor market could reduce more spending and continue to slow economic growth. A recession would be negative growth, so we have a decent margin before we are in the danger zone of a serious contraction.
Positive growth still provides investors with the potential of positive returns, which could be lower given economic uncertainty. Therefore, it is generally not recommended that investors stay on the sidelines waiting for a larger opportunity. Slow steady growth is a better alternative than interest rates that don’t keep up with inflation.
Research from Google AI on The US Economy in July 2025.
Patricia Kummer is managing director for Mariner, an SEC Registered Investment Adviser.