By
Derek Hamilton
March 18, 2025
Equity markets have come under pressure recently. We have written extensively about the risks surrounding the potential policies of the current US administration, including tariffs, immigration, and government spending cuts. Specifically, the impact from policy uncertainty is a key risk to the economic outlook.
Confidence is key, in our view. The uncertainty around future policy can have an impact on potential business decisions, and companies have proven over time to be adaptable to changing environments, but only when they know the rules of the game. It is hard for executives to move forward with new capital spending plans or to increase hiring when the outlook is murky.
The chart below shows a large drop in manufacturing new orders after the big post-election rise at the end of last year. Some of the increase in 2024 could have been driven by proactive inventory building ahead of potential tariffs. Even so, the drop is notable – if companies begin to pause or cancel future activity, it could filter into the labor market and eventually consumer spending.
The administration’s large number of policy changes in a short period of time are a cause for concern. We hope clarity will increase soon, particularly with tariffs, since the administration is expected to announce the details of further tariff plans on April 2. At the same time, we believe several pro-business policies are coming, including deregulation and tax cuts.
Overall, we continue to expect markets to be volatile.
Institute for Supply Management (ISM) Manufacturing New Orders Index
Sources: Macquarie, Macrobond, Institute for Supply Management.
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The Institute for Supply Management (ISM) Manufacturing New Orders Index monitors new order volume based on the ISM’s surveys of manufacturing firms.
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