Hardwood Floors October/November 2025

FINANCE BUSINESS BEST PRACTICES

By LPL Financial

2025 MIDYEAR OUTLOOK: PRAGMATIC OPTIMISM – Measured Expectations

uncertainty. For example, the amount of new orders contracted for the first time in nearly a year. Tariff impacts also are elevating prices paid by services sector companies likely, with the Prices Index hitting its highest level since November 2022 when annual inflation rose to 7.1 percent. Business leaders’ perspectives serve as a vital complement to official government statistics, which often suffer from low response rates and delayed reporting. Listening to these insights helps provide real-time signaling on industry health and emerging risks, which is even more crucial in uncertain economic times. Fed officials have expressed concern over the difficult tradeoffs involved in navigating the current environment, especially as new tariffs and policy measures could exacerbate inflationary pressures. This echoes the past, when aggressive monetary tightening eventually was implemented to tame inflation, often at the expense of economic growth, illustrating the delicate balancing act policymakers must undergo at the moment. For markets, these challenges present a difficult environment because they combine the adverse effects of inflation, weaker employment, and slow growth, which impact various asset classes differently. The stock market, for instance, tends to struggle when growth-oriented equities, including tech companies, start to suffer from rising borrowing costs and waning demand. The bond market, on the other hand, historically is impacted negatively when inflation rises as fixed income returns get eroded in real terms. Meanwhile, commodities like gold often can perform well in such environments, but the associated rising raw material costs can end up harming industries reliant on industrial production. Ultimately, investors must remain vigilant, relying on industry trends and early indicators rather than lagging official statistics to identify emerging opportunities and sidestep risks.

The current economic landscape is difficult to gauge given all the distortions that obscure the true health of the economy. After a decline in gross domestic product (GDP) in the first quarter following a surge in imports, the subsequent rebound in growth might create a perception of a strong recovery, but we think this is likely a false dawn. The whiplash in trade policy is impacting official economic data and creating difficulties for investors, as it becomes almost impossible to discern whether the economy is rebounding genuinely or merely experiencing short-term fluctuations. Such distortions highlight the importance of looking beyond government statistics to industry reports from the likes of the Institute for Supply Management (ISM) to form a clearer picture of economic conditions. The ISM Composite Index, which gives insights into business views from across the country in both the goods and services industries, fell in recent months and points to a broader slowdown coupled with reaccelerating inflation. The May ISM Report on Business for the services sector revealed some disturbing realities for several sectors amid trade

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