Recap of the Quarter
Vladimir Lenin once said, “There are decades where nothing happens; and there are weeks where decades happen”. Over the past ninety days, it has certainly felt like decades have happened. The second quarter of 2025 began with stocks markets falling sharply for two weeks after Trump’s April 2 Liberation Day announcement. After it became clear that the worst-case scenario for tariffs would not become reality, stock markets began to recover and finished the quarter near all-time highs.
On again, off again tariffs led to the acronym, TACO (Trump Always Chickens Out) going viral. That was all the motivation Trump needed to continue flexing his muscles, cranking up the pressure on trading partners: 30% on the European Union, 50% on Brazil and 50% on copper, to name a few. Over the coming weeks, we continue to expect more tariff-related tweets and more deadlines to be extended. On a positive note, there have been several encouraging economic reports recently, including strong employment numbers, furthering the stock market’s confidence.
The war between Israel and Iran unsettled markets for a few weeks. Thankfully the conflict was short-lived and with Iran’s nuclear weapons program significantly diminished, the world is a safer place. Also, in the quarter, the bromance between Trump and Elon Musk quickly unraveled. If Elon Musk does in fact set up his America Party, it will have an impact on the 2026 midterm elections.
Currency and Tariffs
Year-to-date, the value of the US dollar has decreased approximately 10% versus the rest of the world. Many US corporations generate a large percentage of their revenue and profit outside of the US. This means that when those foreign-earned profits are reflected in quarterly earnings reports, the earnings per share, in US dollar terms, will be higher than they were in 2024. Additionally, a weaker US dollar means that foreign countries can purchase more US goods with their local currencies – possibly lessening the trade imbalances that Trump has harped on over the past several months.
RBC estimates that the average US tariff rate will likely be around 15% once deals are eventually announced. This is a six-fold increase from the 2024 average of 2.4%, although, it is too early to determine the full impact that tariffs are having on the economy. The chart below shows that US tariff revenue in May 2025 increased significantly from a year earlier.
Pearlstein Wealth Team
We are excited to announce that Alicia has welcomed her second boy, Harley! Alicia and Harley are doing well. Additionally, we are happy to welcome the newest member of our team, Brandon Boehm. Lastly, our summer student, Danielle, is going to remain with us until mid-August.
Wishing everyone a terrific summer!
Pearlstein Wealth
