The South Coast 2025 Q2 Economic Outlook is presented by JP Morgan featuring special guest Dr. David Kelly, Chief Global Strategist at J.P. Morgan Asset Management. Dr. Kelly provides an in-depth analysis of the economic and market landscape heading into Q2 2025. He discusses the growing risks of a recession and resurgent inflation, driven by policy uncertainty, slowing consumer spending, and newly imposed tariffs. Despite continued job growth and strong corporate earnings, markets have been volatile, with a sharp correction in U.S. equities and rising interest rate concerns. Dr. Kelly emphasizes the importance of portfolio rebalancing, global diversification, and the role of alternatives in navigating an increasingly uncertain investment environment.

This episode will highlight the different types of long term care options available, the costs associated with these services, and strategies for planning ahead. We will also discuss the emotional and practical aspects of long term care, including how to communicate with loved ones about these important decisions. Join us as we navigate the complexities of long term care planning and provide you with the knowledge you need to make informed decisions for your future.

Economic and Market Update 2Q 2025

• The U.S. economy began 2025 with solid momentum but has slowed due to weakening consumer sentiment, tariff uncertainty, and equity market correction.

• Concerns of a possible recession and resurgent inflation have increased, fueled by softer spending, slowing job growth, and rising costs.

• GDP growth remains supported by consumer activity, but a drop in confidence and front-loaded imports tied to tariff fears may weigh on Q1 data.

Inflation & Policy Environment

• Inflation eased in early 2025 but remains elevated compared to fall 2024, driven by tariffs and supply chain challenges.

• The Federal Reserve held rates steady in Q1, citing mixed signals from growth and inflation trends.

• Tariffs on China, Mexico, and Canada have raised the average U.S. import tariff rate to 6.4%, the highest since the 1970s.

Labor Market Dynamics

• Unemployment has stabilized near 4.1%, still historically low, though job growth is expected to moderate.

• Immigration drove labor force expansion post-COVID, but new restrictive policies may limit future labor supply and push wages higher.

• Wage growth has normalized from its peak but may face renewed pressure if labor supply tightens further.

Market Trends & Earnings

• The S&P 500 entered correction territory after a sharp sell-off in the “Magnificent 7” stocks.

• Earnings grew 10% in 2024, led by broader sector participation and strong margins—though 2025 estimates may be overly optimistic amid economic headwinds.

• Elevated equity valuations remain a risk; markets may penalize earnings misses more harshly going forward.

Investment Themes & Portfolio Strategy

• Rebalancing portfolios away from highly concentrated sectors is essential in the current environment.

• Active management and international diversification are increasingly valuable as global markets outperform U.S. equities.

• Fixed income remains attractive for yield, though corporate spreads have widened modestly. Credit quality remains strong.

Alternatives & Diversification

• Traditional 60/40 portfolios face challenges with higher correlations and elevated equity valuations.

• Alternative assets—including real estate, infrastructure, private equity, and venture capital—offer diversification, income, and potential growth.

• Active strategies are key to identifying resilient opportunities and mitigating downside risk.

Action Items for Investors

• • Reassess portfolio exposures, particularly to overvalued or highly concentrated positions.

  • Explore diversification through international equities, fixed income, and alternative asset classes.

  • Use market pullbacks to access high-quality assets at more favorable valuations.

  • Monitor evolving fiscal and trade policies, as their impact on inflation and growth remains significant.

  • Stay focused on fundamentals and maintain long-term discipline amid ongoing volatility.