Ian Toner, chief investment officer at consulting firm Verus Investments, thinks the likelihood of a global recession has subsided from a year-and-a-half ago when he worried such a slowdown might indeed strike global economies.
“The U.S. economy has remained highly resilient, labor markets are pretty strong, and inflation has been gradually coming down,” he said. “And all amid a still high-interest-rate climate — and now those rates are gradually easing, and I think that is working its way through the economy and markets.”
In 2024, the Federal Reserve slashed rates by 100 basis points.
However, rates are still high on a relative basis — now between a range of 4.25% and 4.5% after the Federal Reserve kept rates at the same level on Jan. 29 — and Toner believes the Fed will likely only cut rates slowly, and “more slowly than investors anticipate.”
Toner also noted that a “significant material change” would have to arise for recessionary fears to be revived, but that scenario has not occurred yet.
Verus’ institutional clients are currently most focused on the market ramifications of some of newly elected President Donald Trump’s boldest policy propositions, he said.
“What our clients seem most occupied with are how will Trump’s measures with respect to immigration, tariffs and deregulation impact their investments,” he said. “But we always remind them that these measures are still in very preliminary stages, and we don’t really know what shape these proposed policies will eventually take. So it’s far too soon to have any reactions.”
As such, Toner said he reminds his institutional clients that they must look at a very long-term investment horizon and not make any rapid adjustments in their allocations based on shorter-term events.
Trump has made a wide array of tariff threats, including a universal tariff on all imported goods, to others that are focused on specific industries or countries, including Mexico, Canada, China and the European Union.
“Again, it is simply premature to determine how this wide range of possible tariffs will eventually play out and how they may impact institutional portfolios,” Toner said.
However, he said clients should expect that tariffs are more likely to be used tactically and as a negotiation tool with foreign countries rather than indiscriminately and across the board.
Verus has about $1 trillion in assets under advisement.
In December, the nonpartisan Congressional Budget Office warned that if Trump slapped a 10% tariff on all imports and a 60% tariff on all Chinese imports, those two policies would increase inflation by 1 percentage point by 2026. But Toner emphasized this broad-brush approach to tariffs by Trump seems unlikely.
Trump’s posture on immigration is also a big question mark. Toner noted that for now Trump has instructed Immigration and Customs Enforcement agents to arrest and eventually deport undocumented immigrants who have committed serious crimes. As with tariffs, how Trump deals with the matter of illegal immigration is unknown and likely multifaceted, and its too early to make any predictions about the economic effect of this changed approach to immigration.
“For now, I am telling institutional clients to remain vigilant but refrain from making any hasty moves in their portfolios,” he said.
Trump also said he wants to cut corporate taxes and deregulate industries, especially oil and gas companies, to stimulate economic growth and investments. While these measures might ultimately generate stronger economic growth, and thereby benefit investors, Toner again repeated it remains far too early to know how deregulation will play out.
