As an investor, you should be following the news.  President Trump is a businessman, not a politician.  He knows what is required to improve the nation’s economy – i.e., to bring about more financial investment, more and bigger businesses, and more jobs at every level.

Trump’s tariffs are one facet of his efforts to improve the economy.  Taxes penalize success.  Tariffs encourage the production of goods within the country.  If he could do it, President Trump would totally replace taxes with tariffs.  Some question whether tariffs are worth the cost, but the economic indicators are starting to show improvement.  

One important indicator is the interest rate set by the Fed.  Fed Chairman Powell has been reluctant to lower interest rates; he has expressed doubts that tariffs will not cause inflation.

However, it is already clear that tariffs are not causing inflation.  In fact, it is also becoming clear that the Fed has been too slow to reduce interest rates, keeping the costs for businesses to borrow the money too high for growth to reach its natural level.  Similarly, would-be homeowners are still faced with high interest rates on home mortgages.

It is only in the last week of September that Powell has finally begun to realize that interest rates must come down – that they are hurting American growth and well-being.

In general, stock prices have been going up since Trump became President in February.  If the Fed acts as expected in its September meeting and lowers the interest rate, it is not unwise to expect the rate to be lowered by half a point, rather than by the more cautious quarter-point.  

The stock market is already beginning to anticipate that reduction; stock prices are beginning to rise just a bit faster.  

The September reduction of the interest rate virtually guarantees a nice rate of economic growth for the rest of 2025.  That economic growth translates into rising stock prices, again for the rest of the year.

Peering into the future borders on looking into a crystal ball, but it is easy to expect another reduction of the interest rate in December – which means increasing stock prices well into the new year.

“As goes January, so goes the year,” is a common phrase, based on investors’ past experience.  With further interest reductions in April and June, it looks like 2026 will be a good year for investors as well.  

If you are new to Investors Column, take a look at some of the past articles to learn more about how to improve your investing skills.  Investors Column is aimed at helping to improve the investing skills of investors just starting out.  See links to all articles on  www.scottschoice.com .

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