Market view: From the desk of CIO Eric Freedman

I’ve been everywhere, man
I’ve been everywhere, man
Crossed the desert’s bare, man
I’ve breathed the mountain air, man
Of travel I’ve had my share, man
I’ve been everywhere

-“I’ve Been Everywhere” as sung by Johnny Cash (released in 1996), original lyrics by Geoff Mack (1959).

Books, poems, songs and other mediums explore traveling. Whether it’s Homer’s Odyssey, Chaucer’s Canterbury Tales, Jessica Nabongo’s Catch Me if You Can or the above song excerpt (which has been adapted to include multiple countries over the past seventy years), some common themes emerge. Meeting new people, sampling local cuisine, exploring monuments, and appreciating historical significance represent highlights. Transportation snafus, time changes driving sleep variance, lonely spells and missing family events represent life on the road’s underbelly.

Traveling to see clients and prospective clients is a privilege, and while I cannot match the 92 places Mr. Cash mentions in his version, in the last few months I have had the opportunity to travel to Miami, Naples, Sarasota, Charlotte, Amelia Island, New York City, Minneapolis, St. Paul, Raleigh, Madison, Milwaukee, Chicago, Naperville, Reno, Las Vegas, and Boston, and some of those cities multiple times on different trips. Each visit has included small and large events where we share our perspectives and leave plenty of time for discussion and questions, and given current events, the Q&A section is selfishly my favorite part. Sometimes audience members share perspectives from their industries or communities, so we glean unique insights. What follows are frequently asked questions and our responses. As always, we retain a “working thesis” perspective on capital markets; interactions between politics, businesses and consumers make for a complicated backdrop, but we still see plenty of opportunities for clients to increase their odds of a favorable outcome amidst the current “chop.”

How do you see consumers reacting to the current back-and-forth on tariff policy?

Overall, we would characterize consumers as resilient but slowing. We track consumer activity across several variables, including spending, borrowing, job prospects, timeliness of debt repayment and income. We score these different variables out of 10, with zero being weakest, 10 being strongest. As Figure 1 details below, consumer strength has maintained a consistent level for all of 2024 and thus far in 2025, although those levels do reflect some deterioration from peaks seen in 2022.

Tariff and tax uncertainty are the latest concerns we are hearing from consumers, and part of our analysis includes assessing company comments we track to understand how consumers across industries like retail, hospitality, durable goods and others see the current environment. We are seeing consumers defer larger ticket purchases and we continue to witness a highly promotional backdrop to get certain consumer cohorts, especially lower middle income and lower income consumers, to spend money. We will continue to gauge developments here and quantify the difference between survey data and actual trends.

Is inflation likely to dip down or should I factor in higher prices in most of the goods I purchase?

We would encourage consumers to factor in higher prices in the near term, but we do not anticipate a paradigm shift in inflationary pressures. Irrespective of one’s political views, tariffs represent costs that need to be paid by someone. Businesses have had very different reactions to potential tariff increases. Home Depot noted in late May that they do not plan to broadly rise prices due to new tariffs, using their broad sourcing capabilities and product breadth to help contain consumer costs. Around the same time, Walmart noted that they will continue to work to keep prices low, they did anticipate some price increases to become visible in May and June. Other companies and business executives note that they will pass on prices to consumers directly.

We have seen a consistent theme where forecasters are lowering their economic growth forecasts while modestly increasing their inflation forecasts. Inflation expectations are going in the opposite direction of where central banks like the U.S. Federal Reserve want to see them.

Do you think we will see borrowing rates drop once we see more resolution on tariffs and taxes?

Based on what inflation is doing, we would be surprised for central banks to be aggressively cutting interest rates. Tariff outcomes will be key. While we await further progress or at least clarity, central banks actively assess how embedded inflation expectations are across the economy, and thus far attitudes toward longer-term inflation appear to be “anchored” or tied more closely with expectations over the past decade or so. Many deflationary forces like technology and an aging population offset some of the more inflationary variables at play. A lot of clients ask us if we think we will ever return to the zero to low interest borrowings that had become more prevalent in the post great financial crisis era. We do not anticipate that outcome anytime soon, and the factors that would presage it include a very weak economy, which is also not our U.S. Bank Economics Team's base case expectation.

When do you think the deficit will be a major issue for the economy and policymakers to address?

We wrote about this two weeks ago but it’s worth revisiting. We see the deficit issue playing out in the bond market above anywhere else. For us, the U.S. 10-Year Treasury Note yielding above 5-5.25% would be a sign that the bond market is more concerned about deficit levels, and that policymakers would be wise to act before markets force them to. It is impossible to know at what point markets and to what extent markets will express their concerns, but those yields serve as warnings.

Any recommendations on how to sleep better in hotels?

Make sure you avoid the ones hosting a 6th grade field trip, like a colleague of mine and I experienced in the Chicago suburbs a few weeks back…but we love school spirit and those teachers deserve a raise after that effort!