As earnings season unfolds, a curious pattern has emerged: most companies are reporting strong current performance, often beating expectations, yet issuing cautious or even conflicting forward guidance. It’s not a lack of conviction—it’s a reflection of the moment. We’re in a time of double vision, where two starkly different economic futures are competing for dominance.
United Airlines, for example, offered a “choose your own adventure” forecast: one version if a recession hits, another if it doesn’t. This is highly unusual for a company to do this, but I think it’s perfectly reasonable given where we are. The core issue? Uncertainty—especially around tariffs.
Why Tariff Announcements Shock Markets
When tariffs are announced, the immediate market reaction isn’t just about the specific tax on imported goods. Instead, the concern comes from the uncertainty tariffs create, which widens the range of economic outcomes. Businesses and investors don’t know how global trade partners will respond, whether supply chains will shift, or if today’s policy will be reversed next month.
Markets prefer stability. When trade policy fluctuates unpredictably, companies delay hiring, expansion, and investment, leading to economic slowdowns. That’s why tariff announcements tend to cause volatility—not because of the tariffs themselves, but because of the confusion surrounding them.
Tariffs are doing what they always do: introducing friction into global trade. While they can be useful as a negotiating tool, there’s not a serious economist out there who would claim they’re good for global economic growth. Their very presence complicates planning, clouds investment decisions, and creates a feedback loop of hesitation.
The Market’s Two Paths
Right now, the market is weighing two competing visions of the future:
Scenario 1: Resolution and Recovery
In this scenario, tariffs are resolved in the coming months—perhaps not without some bruises, but without inflicting deep or lasting damage. Economic growth slows temporarily, but ultimately stabilizes and picks back up. This outcome could be supported by a planned extension of the Tax Cuts and Jobs Act, which would inject a new wave of confidence and investment into the system. Under this path, we see the economy bending, not breaking.
Scenario 2: Prolonged Pressure and Recession
Here, tariffs remain in place for too long at current levels, dragging down business investment, global trade, and damaging long term confidence in the US markets. Eventually, this leads to a broader slowdown and the real economy slips into recession. And once a recession starts, it’s not just about reversing policy—the secondary effects (rising unemployment, falling consumer confidence, tighter credit) can be difficult to stop. That would obviously be the worse outcome for markets and economic wellbeing.
While past markets have had wide ranging outcomes in the short term, this chart summarizes very well past market corrections and recoveries that occurred with and without a recession.
Where We Stand
At this point, we still lean toward Scenario 1. While there’s no denying the economy is under stress, the strength shown in recent earnings reports and other economic data suggests we’re still on the path for a moderate decline. Despite the market volatility we saw in April, the overall performance of stocks remains more consistent with a temporary slowdown rather than a full-blown downturn. Stocks are behaving as if we’re in a holding pattern—not in freefall.
We believe there’s still time, although the window is narrowing, for policymakers to course-correct, strike deals, and avoid the deeper pain of Scenario 2.
The Bottom Line:
This is a double vision market. We can see both possible futures—and while neither is guaranteed, one offers a far better runway for recovery and growth. So far, the market seems to be reacting as if Scenario 1 is the more likely outcome. Let’s hope cooler heads prevail before the fog becomes too thick for the markets to navigate.
