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Uncertainty will likely dominate investor sentiment in 2025, according to Charles Schwab chief investment strategist Liz Ann Sonders.
On a recent episode of Decoding Retirement, Sonders noted that investors are going to have to get reacclimated to President-elect Donald Trump’s more off-the-cuff approach to articulating economic and trade policies.
“It’s overused to talk about uncertainty and the impact it has on markets, but I think this is a uniquely high amount of uncertainty,” Sonders said (see video above or listen below), “not just because of the knowledge we have of Trump in the first administration, but [because of] how policy got affected, especially on trade in that 2018 period where it was often by tweet.”
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Sonders noted key economic issues, including trade wars, inflation, and deportation policies, are particularly relevant to the needs and concerns of retirees and those preparing for retirement.
Sonders highlighted key areas of policy uncertainty, starting with widespread misunderstandings about tariffs.
“I’m a real stickler with the way headlines read about tariffs,” she said.
Headlines often simplify Trump’s proposals as “tariffs on China,” which misleads the public, she explained. The exporter doesn’t pay the tariff — the US company importing the goods does, and that cost often gets passed on to consumers, Sonders noted.
Read more: How do tariffs work, and who really pays them?
Trump’s mass deportation plans add further complexity. Such measures, often enacted through executive orders, could increase inflationary pressures while dampening economic growth, especially when combined with tariffs.
This has led to reemerging concerns over “stagflation,” a term that originated in the 1970s but today is “used more broadly to describe times of low economic growth combined with high inflation,” Sonders explained.
“It’s hard to argue against them being inflationary and suppressing growth,” Sonders said. “That’s why you’re seeing a lot more reference to the term of stagflation because of the potential we see [for] lower growth and higher inflation. Maybe the ultimate end is worth it, but that’s the near-term implication that we’re facing.”
The Trump administration’s thinking is that these policies would bring about short-lived pain necessary for long-term gain. But Sonders is skeptical.
“We’ve seen this story before — like with the Smoot-Hawley Tariff Act of 1930,” she said. “I don’t think [tariffs are] well understood, but it’s what we likely have to live with. … It’s a tough environment to try to plan.”
