January brought a good start to the year for investors. The global stock market rose, as did the U.S. bond market. Leading the pack so far are developed international stocks, up about 5%, with domestic value stocks not far behind. Despite a significant one-day drop of some AI-related companies over competitive concerns, even U.S. growth stocks muscled out a gain for the month.
Last year, we wrote about the unwavering strength of the U.S. economy, with GDP growing 2.5% during 2024. With a new administration in office, it is worth considering the list of policies that might impact that. High on the list is tariffs. With President Trump now sworn in to office, the self-styled “Tariff Man” has been in the news. Markets breathed a sigh of relief when he decided not to immediately enact any tariffs as part of his initial executive order salvo, but that proved short-lived. As of this writing, new tariffs will begin on February 1st, as goods from China will be subject to an additional 10 percent tariff.
At a minimum, the application or threat of tariffs makes for a less predictable business environment. One has to sympathize with businesses that proactively moved manufacturing away from China and into countries like Mexico and Canada to avoid the brewing trade tensions between the U.S. and China. Building new manufacturing facilities is not a financially trivial act. If Trump does move forward with tariffs on goods from Canada and Mexico, a lot of that investment will have been for naught. Disruptions aside, tariffs function like an added tax and that tax is generally inflationary. While economists hold the nearly universal view that tariffs are detrimental to a country’s prosperity, we doubt that they can do substantial damage to the U.S. economy given its current strength. We plan to discuss this in more depth in our February client letter.
Finally, we wanted to close with an update regarding our 1111 Broadway office. Through the pandemic, we learned that clients were comfortable meeting with us virtually. This preference carried forward into the post-pandemic environment. While we can always meet with clients in-person, this shift in client preferences has led us to consider an alternative to our one, large Broadway office. In the spring of this year, we will be moving offices from our Oakland location to a smaller location in Orinda’s Theatre Square. We will also be maintaining meeting locations in Oakland and in Santa Rosa. Importantly, no matter where we meet our clients, Oakland will remain the philanthropic focus of our firm.