Economists were wrong about tariffs. They need to figure out why.

[Mosby]

13. 'Liberation Day' in retrospect: 6 things that surprised investors

Liberation Day supercharged recession fears. Downturn odds doubled to 40%, and over 80% of U.S. CEOs expected a recession. More than 70% of S&P 500 companies mentioned “tariffs” in earnings calls.

Yet the economy held steady. Tariff-driven inflation wasn’t as severe as feared, and companies were well-positioned to avoid major layoffs. S&P 500 net margins remained solid at 12.3% in the second quarter of 2025 – just below the first quarter’s 12.7% and above the five-year average. Now, the third quarter is on track to be the ninth consecutive quarter of earnings growth, a streak last seen in 2018.

Artificial intelligence (AI) and automation have reshaped the growth story. Tech+ firms now make up nearly half the S&P 500’s market cap. Capital spending contributed nearly half of U.S. GDP growth in the first half of 2025, marking a shift away from consumption-led expansion. Innovation and investment have helped the economy weather the storm.

Liberation Day” rattled corporate America. Guidance turned cautious. Hiring slowed dramatically. The latest Challenger Report shows hiring plans at their lowest since 2009, with just under 205,000 new jobs announced in 2025 – a 58% drop from last year.

However, companies didn’t sit still. Strong balance sheets and healthy margins enabled them to adapt – diversifying supply chains, near-shoring, adjusting pricing and investing in tech to manage costs.

About 60% of U.S. businesses have said they are considering reshoring production, according to a recent KPMG survey of 300 executives.2 Only about one in ten have started, but the White House’s own tracker is already brimming with major manufacturing pledges – from Apple and Nvidia to Ford, General Motors, Bristol Meyers Squib and Biogen.3

Most of those plans are still on paper – and include some previously announced commitments – but the pace of the shift shows how quickly U.S. companies can pivot under pressure.

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The S&P 500 is up about 15% this year – even after a 19% drawdown and full recovery – outpacing its historical annual average. U.S.-listed exchange-traded funds (ETFs) have pulled in $950 billion so far, including a record $150 billion in September.4, 5, 6 Annual flows are on pace to top $1 trillion for the first time.7

Momentum has gone global. European ETFs have raked in around $220 billion of inflows this year,8 and nearly 80% of the 60 global stock markets we track are up at least 10% the strongest breadth of its kind since 2009.9 Emerging markets are leading: Colombia (66%), Greece (66%), Peru (57%), Korea (57%) and South Africa (47%) are the year’s top five performers (in local currency).

https://www.chase.com/personal/investments/learning-and-insights/article/tmt-october-ten-twenty-five#:~:text=Downturn%20odds%20doubled%20to%2040,the%20economy%20weather%20the%20storm.