Quarterly economic outlook

SEI recently released its first-quarter Economic Outlook. Here is a summary of our key perspectives, focusing on global economic growth, monetary policy, inflation, geopolitics, elections across the globe, and equity markets. 

• The optimism among U.S. investors that greeted Trump’s election has been completely unwound as concerns over tariffs and the deteriorating relationships with U.S. allies take centerstage.
• Trump views tariffs as a tool that serves multiple purposes including border control, compelling NATO allies to spend more money on their own defense, correcting economic imbalances, encouraging the reshoring of manufacturing, and generating revenue.
• Tariffs are an inefficient way to raise revenues and should cause prices to rise while restricting consumer choice.
• Although U.S. gross domestic product (GDP) will likely be weak in the first quarter, SEI still expects the economy to grow near 2% over the full year. This assessment is subject to a downward revision depending on the severity of the coming tariffs.
• Outside the U.S. there are signs that growth might be picking up. Germany’s loosening of fiscal constraints should lead other European countries to do the same, leading to higher spending on defense and infrastructure.
• Although Elon Musk’s war against government waste grabs headlines, the impact on overall U.S. government spending will likely be limited.
• Federal Reserve Chair Jerome Powell resurrected the term “transitory inflation” when describing the impact of tariffs on the price level. In theory, he is correct. But people are highly sensitized to rising prices, and a tightening labor market (the result of fewer migrants entering the labor force) could lead to a modest wage-price spiral that keeps inflation higher for longer.
• Central-bank policy divergence has been a long-running theme. It may continue, but a more aggressive fiscal policy in Europe could make the European Central Bank less eager to cut rates in the future.
• The drop in U.S. yields has gone too far given the inflationary pressures that we expect to develop from tariffs. We still expect the 10-year Treasury to trade mostly in a 4.25%-to-4.75% range this year.
• European stock markets have enjoyed a sharp first-quarter gain in reaction to the German elections and the expectation that fiscal policy would become more expansive. The outperformance of developed equity markets versus U.S. equities so far this year is based on investors’ perception that growth in earnings outside the U.S. will accelerate after a long period of relative stagnation.
• It has become easier for investors to defend both diversification outside the U.S. and a tilting toward value.

Important information 

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Positioning and holdings are subject to change. All information as of the date indicated. There are risks involved with investing, including possible loss of principal. This information should not be relied upon by the reader as research or investment advice, (unless you have otherwise separately entered into a written agreement with SEI for the provision of investment advice) nor should it be construed as a recommendation to purchase or sell a security. The reader should consult with their financial professional for more information. 

Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results.

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The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction. Our outlook contains forward-looking statements that are judgments based upon our current assumptions, beliefs, and expectations. If any of the factors underlying our current assumptions, beliefs or expectations change, our statements as to potential future events or outcomes may be incorrect. We undertake no obligation to update our forward-looking statements.

Information in the U.S. is provided by SEI Investments Management Corporation (SIMC), a wholly owned subsidiary of SEI Investments Company (SEI). 

Information in Canada is provided by SEI Investments Canada Company, a wholly owned subsidiary of SEI Investments Company (SEI), and the Manager of the SEI Funds in Canada.

Data as of 3/31/2025 unless otherwise indicated.