Our Risk Odometer moved down from +3 to +1 this month, causing us to downgrade our outlook from “Positive” to “Cautiously Positive”. The downgrade in our Risk Odometer and Outlook is primarily related to heightened volatility related to tariffs.
Tariffs are not an input to our Risk Odometer, but they are indirectly impacting our individual risk indicators, such as Technical Price Action and Volatility. These indicators have recently turned from positive to neutral causing a downgrade in our outlook.
The uncertainty around tariffs is causing a slowdown in the economy. The slowdown has not been dramatic, though, and the labor market remains healthy. Maintaining a healthy labor market is the most important element to avoiding a recession. We believe the longer the tariffs remain in place and/or the longer they create economic uncertainty, their indirect impact will bleed into more of our risk indicators, specifically Economic Indicators and Earnings.
Earnings growth remains positive but is also slowing. Analysts have downgraded their outlook for first quarter S&P 500 earnings from 11.1% in November (prior to tariffs becoming a focal point) to 6.7% currently. For all of 2025, analysts have downgraded earnings growth from 12.5% to 9.4%. This is still positive growth, but the downward trend is alarming to us.
