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Slow-Mo Economy, Fast-Mo Playbook For You
Noah Zelvis
September 24, 2025
The Fed already gave us a rate cut, and now the economy feels like it’s running a bit winded. Business activity is still expanding, just not with the same pep.
It’s a setup you can play, if you pick your spots carefully.
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The Economy Hits the Brakes (Lightly)
September’s PMI slipped to 53.6 from 54.6. Still above 50, so technically “expansion,” but slower than August and the weakest in three months.
Services cooled, factories cooled, and hiring cooled. Richmond’s regional survey went straight into the red at –17, which means more firms are shrinking than growing.
Think of it this way, the economy is still on the treadmill, but the incline just got bumped up, and you can hear the breathing get heavier.
Nobody’s flying off the back yet, but the pace is unsustainable without a bit of a water break.
For you, this slowdown is a double-edged sword. It’s bad news for companies that depend on strong order books, but it gives the Fed more cover to keep easing.
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Inflation’s Losing Its Punch
Tariffs are still feeding into higher input costs, but here’s the twist. Companies can’t raise their own prices as easily.
Selling prices rose at the weakest rate since April. That’s good news for consumers, who won’t see sticker shock at the grocery store, but it squeezes profit margins.
This dynamic matters because the Fed’s been caught between two fears of inflation staying sticky versus the job market cracking.
Now it looks like inflation is moderating naturally, even with tariffs, while job growth is fading fast.
That tips the balance toward more cuts, but it also means we’ll see more management teams complain about margin pressure on earnings calls.
If a business doesn’t have pricing power, its profit story is going to wobble.
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Tariffs: The Gift That Keeps on Taking
The OECD just warned the U.S. economy could slow from 1.8% growth this year to 1.5% next year, with tariffs being the main culprit. Import duties are now at their highest level since 1933.
Companies have been absorbing costs in margins, but they won’t be able to keep doing that forever.
As inventories run down, those costs will filter through, meaning inflation may creep higher again in 2026, just as growth is cooling.
It’s like eating your emergency trail mix before you even hit the trail. Once it’s gone, you’ve got nothing left to buffer you.
For you, that means 2025 looks like the sweet spot. Growth is slowing but not collapsing, inflation is tame enough for rate cuts, and companies are still holding margins together.
2026 could be tougher if tariffs keep biting.
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But wait too long, and Wall Street takes it first.
What This Means for You
So, what does all this macro noise boil down to for your portfolio? A few things:
Lower rates = cheaper debt. Expect credit card APRs and HELOCs to drift lower, though not overnight. Mortgages may also ease if Treasury yields follow. If you’re house-hunting, rate dips may come in waves, keep your paperwork ready.
Equities get a shot. Cyclicals and small caps usually perk up first when borrowing costs ease. Don’t expect tech darlings to roll over, but the baton can pass to more boring, real-economy names.
Bonds are a mixed bag. Intermediate Treasuries could benefit if the Fed cuts again, but inflation risk limits how far yields fall. A ladder with some short exposure still makes sense.
Tariffs complicate the picture. Domestic supply chains and U.S.-heavy operators have the advantage. Import-heavy businesses face headwinds.
Cash is still an asset. With rates cutting, you’ll see high-yield savings dip, but staged entries into equities and bonds can still beat sitting on too much idle cash.
Politics at the Table, Risk in the Air
As if the economics weren’t enough, politics is in the Fed’s living room. A court fight kept Governor Lisa Cook at the table.
Trump’s new appointee Stephen Miran wanted a half-point cut, but everyone else stuck with a quarter.
Powell now has to steer not only the economy but also a board split between camps that want to cut faster and those who want to hold back.
For you, that means communication risk is sky-high. A single Powell phrase about neutral or balance of risks can swing yields 20 basis points in an afternoon.
If you’re trading around these meetings, size smaller, stage buys, and expect whiplash.
The Cheat Sheet for Watching the Fed
PMIs: Slipping but not crashing. Sub-50 would signal contraction.
Core inflation: Drifting closer to 2.5% opens the door for three cuts this year. Sticking near 2.8% means fewer.
Tariff language: If Powell shrugs tariffs off as temporary, markets will cheer. If he hints they’re sticky, expect more caution.
Bottom line is the dots move bonds, and Powell’s tone moves stocks.
Positioning Before the Next Cut
Here’s the friendly advice version:
Run the barbell. Keep your safe havens (utilities, healthcare, staples) but pair them with cyclicals that get turbocharged if the Fed accelerates.
Favor local players. Domestic sourcing beats import headaches. Companies with clean supply chains deserve extra weight.
Stick with pricing power. Brands that can run good-better-best strategies without nuking margins are the ones to own.
Selective small caps. Rate cuts can juice them, but balance sheets matter more than ever. Pick the strong horses, not the cheap ones.
Consumers Are in Coupon Clip Mode
Households are cautious. Paychecks feel thinner, jobs aren’t as plentiful, and groceries aren’t exactly cheap.
That’s why people are trading down, waiting for promos, and splurging selectively.
Companies that get this right with more promotions, smaller pack sizes, and loyalty perks will hang onto customers without torching margins.
Think of it as trading down without tapping out. Those are the companies you want.
Risk Management for This Week
Keep it simple:
Take a little profit if you’re heavy in high-beta names.
Don’t chase into Powell’s presser, use staged buys.
Options players can use short-dated call spreads on cyclicals make sense if you think three cuts are coming.
Long-term? Don’t overthink it. The Fed’s on the road to easier policy. Build positions that benefit from that trend.
Coffee-Napkin Takeaways
Growth is slowing, but not crashing.
Inflation looks tame for now, but margins are getting squeezed.
Tariffs are a long-term drag that resurface in 2026.
Barbell strategy: pair defensives with rate-sensitive cyclicals.
Focus on domestic operators, cash flow machines, and pricing power.
Top Picks
Atkore (NYSE: ATKR) |
Carlisle Companies (NYSE: CSL) |
GXO Logistics (NYSE: GXO) |
Copart (NASDAQ: CPRT) |
That’s it for today’s edition—thanks for reading! Reply to this email with any feedback or let me know which macro trends or markets you’d like me to cover next.
Best Regards,
—Noah Zelvis
Macro Notes