Chicago panel split on road ahead in 2025

Dr. Bob Froehlich, John Rogers, Jr. and Diane Swonk took the stage on the Executives’ Club of Chicago’s Annual Economic Outlook panel Tuesday.

Executives’ Club of Chicago

The Fed could have two more rate cuts in store this yr, there’s a floor forming under the Treasury bond market, a brief recession is a possibility, and fire-struck Los Angeles is the “wild card” in 2025, in response to panelists on the Executives’ Club of Chicago’s Annual Economic Outlook event. 

The panel, which took place in Chicago’s Loop Tuesday, featured sobering forecasts from KPMG Chief Economist Diane Swonk and Ariel Investments Chairman and Co-CEO John Rogers, Jr., with a more upbeat outlook from former Deutsche Asset Management Vice Chairman Dr. Bob Froehlich, who advised the audience to show off the news and quit worrying. 

“We’re seeing a floor form under the Treasury bond market, and that’s on account of the indisputable fact that we’re issuing numerous debt,” Swonk said. “There are concerns about inflation and tariffs. And we even have central banks not buying Treasury bonds like they once did, including the Federal Reserve. And all of that has put upward pressure.”

Swonk also lamented the decoupling of consumer confidence from economic data. Explaining Americans’ sour mood on the economy, she pointed to a long time of rising inequality and inflation. Specifically, she cited the displacement of staff and economic shocks just like the pandemic and the 2008 financial crisis, which “added insult to injury.” As a daughter of the Detroit area, she said, she has seen firsthand the results of jobs moving offshore.

“Now we have numerous policy changes coming, the extent of inflation remains to be high and the Fed’s battle against inflation isn’t yet over,” she said. “Policy remains to be technically in restrictive territory, and regardless of the Fed doesn’t do, the bond market will clearly do for it.”

During Trump’s first term, “we could still withstand tariffs and things like that without it tripping inflation,” she added. “Now, supply chains… are longer and more vulnerable to external shocks than they once were.”

Swonk warned the room that it not matters what the precise causes of skyrocketing prices actually were: “Inflation is seen because of this of two things: government mismanagement and company greed.”

But Americans weren’t reassured by Trump’s victory: the patron confidence index fell in December, and the University of Michigan’s consumer sentiment index also plunged in December and early January. Individuals are buying ahead of price hikes, including from potential tariffs, Swonk said, which could create a self-fulfilling prophecy. 

“The challenge is ensuring that as we attempt to right the ship for many who were hardest-hit by inflation … they’re essentially the most vulnerable to being hit by tariffs and curbs on immigration,” she said. “Tariffs are a regressive tax, they hit low- and middle-income households harder. They do protect industries, but they never deliver the investment in those industries to offset the pain they induce in consumers.”

Packed room at Annual Economic Outlook event The audience on the 2025 Annual Economic Outlook event in Chicago.

Executives’ Club of Chicago

Bitcoin has surged because the election, possibly elevated by Elon Musk, who’s bullish on cryptocurrencies. Rogers, who last yr called it “rat poison,” issued a mea culpa of sorts.

“I used to be completely fallacious” about bitcoin, “so I used to be sort of hoping I would not be invited back,” joked the longtime Annual Economic Outlook panelist.

Froehlich believes the economic story of the upcoming yr shall be “lower and slower” rates of interest and inflation. He said he expects to see robust earnings in the brand new yr, deregulation and company tax cuts. 

Onshoring of inventory will profit small firms, he said, as will lower inflation and lower rates of interest. And as for bitcoin?

“I do not bet on sports, and I do not bet on fake currencies,” Froehlich said.

The panelists shared what keeps them up at night; for Swonk, it is the “strain on resources of rebuilding” Los Angeles. “L.A. is the large wild card this yr,” she said. “The variety of billion-dollar climate events has been rising, adjusted for inflation.”

Rogers said the potential breakdown within the structure of the North Atlantic Treaty Organization poses nuclear risks.

Froehlich downplayed fears of mass deportations, saying “I feel it should be muted.” His fundamental concern: the primary yr of a recent administration isn’t a great time to speculate. 

On nuclear risks of a special nature, Swonk noted that Microsoft is attempting to revive Three Mile Island, site of the worst nuclear accident in U.S. history, to make use of all the ability it generates, and other tech firms on the forefront of artificial intelligence are pursuing nuclear power, as well. 

“We’re stressing the energy grid in a unprecedented way,” she warned.

Other insights included that it might take a 60% jump in income to bring housing affordability back to 2019 levels, that materials costs will proceed to rise and that the USMCA trade agreement with Mexico and Canada comes up for renegotiation in 2026. If it sunsets, that might have far-reaching costs for U.S. consumers.

Still, Rogers said that while he’s pessimistic concerning the market today, he stays optimistic long-term.

“Our capitalist democracy is one of the best system ever invented, and we discover a method to get back on the right track regardless of what the challenges this great country faces,” Rogers said.

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