Solutions Economic and Market Watch

Hello, and welcome to the Economic & Market Watch podcast for the week of December 15, 2025. This is Sam Kem of CFC.

Today is our special episode, the year in review. And here with me today is Antony Davis, John Suter and our producer, Kathy Ryan. So let's get started.

First thing first, Antony, I would like to ask you this. What bothered you the most in 2025?

Yeah. That's an easy question. Definitely the tariffs. There's no question among economists that tariffs are a bad idea. This goes back to it's-- it's very much akin to the medical profession in the 1600s where you put leeches on people.

And we pretty quickly figured out that's a bad idea. So too with economics. About two hundred years ago, we figured out tariffs were a bad idea. The joy of free trade is that we each do what we do best, and other countries do what they do best, and everybody exchanges.

And look, we do the same thing as individuals all the time. I'm a good economist. I'm a horrible farmer. Other people are good farmers. They're horrible economists. So I do the economics. They do the farming. We exchange, and everybody's better off.

It's the same way with countries. Restricting trade is like telling me I have to grow my own food and telling the farmers they have to produce their own economic analysis. We both end up worse off.

Well, that's a good point. And for me, I think it would be--and this has always been a problem, but I feel like 2025, it definitely has accelerated. And that is the idea that human beings are burdens. Workers are burdens instead of resources, and this has been accelerated by artificial intelligence. I feel that business leaders tend to see their workers as somehow a burden, particularly, I would say, for bigger companies, large companies. They look at workers, they look at employees as just an item in their balance sheet instead of the resources, the very thing that drive their company, that drive growth and innovation and everything.

So, you know, every time, every single time when there's advanced technology coming out, people always discuss, oh, is this going to replace workers? How can we cut workers? How can we cut our workforce? Instead of, you know, how can we use this to enhance our productivity, how to enhance workers' productivity?

Ultimately, human beings also have some special qualities to them that make their work, their productivity special. And the concept that they're burdens, that really bothered me the most. And what about you, John?

What bothered me the most in 2025? Probably the most bothersome economic event in 2025 is increased pressure being put on the Federal Reserve by the current administration. If you look at their purpose, the Federal Reserve Reform Act of 1977, they have a dual mandate of promoting maximum employment and stable prices along with moderating long term interest rates. And if you compare those current indices values with historical averages going back to 1960s, they are all within those measures. I understand that the current administration is trying to bring both short- and long-term interest rates down, but the other problem is growing size of our national debt at current interest rates.

The deficits we have been running are not a creation or fault of any single party or politician. Recent presidents always seem to have good reasons to kick the balanced budget can down the road. But the irony of the current trend is that the CBO projects the debt could almost double in size as a percentage of GDP by 2050, with a third of every tax dollar going to pay interest. That's a heavy lift for our younger generation.

So on the other side of the ledger, Sam, what surprised you the most in 2025 in terms of economic events?

Well, if you remember, about a year ago, we also we recorded the same episode, year in review. And when I was asked what bothered me the most, my answer was the government deficit, the fact that we, you know, we had no plan to fix this thing. So what surprised me the most in 2025 is not that we fixed it. We definitely did not fix it. But it's the fact that I think government deficit somehow has become a topic that hit mainstream headlines more than it did in the past.

It's not really a 2025 problem. It's a problem the whole time. But mainstream media, I think, has picked up this and covered this so much more than before 2025, and that, I would say, is surprising to me. What about you? What surprised you?

The biggest surprise probably in 2025 for me would have to be the run up in the S&P 500 in a slowing economy. It not only highlights that the economy is not the stock market, but it amazed me how bad the outlook for equities appeared in the April during Liberation Day. The S&P 500 was down roughly 12%, but has come screaming back to reach 16%. That's quite a turnaround in one year. The S&P 500, believe it or not, set over 30 record highs in 2025.

Why, even JPMorgan in the year ahead outlook says that AI will continue to be the key theme that drives sector performance in 2026, especially the magnificent seven. They see the S&P 500 target at 7,500 by year end 2026, an above trend earnings growth of 13 to 15% for at least the next two years. And if the Fed further eases policy, they see a greater upside with the S&P 500 surpassing 8,000 in 2026. So rounding out our trio today, Ant, what did you see as the biggest surprise in 2025?

For me, the biggest surprise was the resilience of the U.S. economy. We have managed to stuff the worst economic upheavals of the past century into just the past five years. Think about it. Since 2020, Americans have reenacted the upheaval of the influenza epidemic of the 1920s, the unemployment rates of the 1930s, shortages of the 1940s, double digit inflation of the 1970s, the interest rate hikes of the 1980s, housing-price run up of the early 2000s, and now most recently the nosebleed tariffs of the 1930s. That's a century's worth of economic mayhem packed into just the past five years.

Yet, there's been no sign of recession. Unemployment has been steadily rising since late 2022, but it remains well below the pre-COVID average. Economic growth is tepid, but it's solidly positive. Interest rates are elevated, but they're well below their historical averages. So in total, I'd have to say the thing I find most surprising is that we haven't seen not one, not even a series of recessions that one would expect since 2020.

We should round out our episode by talking about our top episodes of the year. John, what was yours?

Inching in at third place was my podcast on "Americans Should Be Feeling Great About the Economy. Right?" You heard Ant talk about how resilient the American economy has been, and it has. But the problem is right now is the bifurcated economy, or what economists term as the K economy, between the haves and the have nots. 10% of Americans are driving 49.6% of the spending, and that could pose a very big problem because they have the discretionary income to turn it on and off when they want.

So we don't want recession, but certainly if something bad were to happen, like in the past, like a pandemic or an invasion or worse yet, a banking crisis, wealthy Americans could turn off the switch, which would definitely hurt spending, which drives 70% of The U.S. economy.

Coming in at number two is my colleague, Ant. Ant, what do you have to say?

My top episode was the "Eight-Year Deadline for Social Security." People are fascinated by Social Security. I would suppose it's because for most people, it's the largest single tax they pay. People have come to think of it as their retirement account, though it isn't and wasn't intended to be. And the Supreme Court made that very clear in a-- in several cases dating back to the 1930s in which the Supreme Court ruled that first, retirees are not entitled to Social Security benefits. And second, that Social Security taxes are part of the general fund, not legally distinct in any way from other taxes.

And both of those things are things that we tend to think are not the case.

For decades, economists have been warning that Social Security's insolvency is a matter of when, not if. And because of the political sensitivity, politicians haven't touched it, and that has caused the problem to grow. And now we're bumping up within ten years' time of the projected insolvency date. And people are, for the first time, starting to get upset about it.

Sam, how about you?

Well, my top episode is "What If China Sold Off U.S. Treasuries?" And I really like this one in particular because I got asked this question a lot. Everywhere I go, the question is always, well, China owns a lot of our U.S. treasuries. So what if one day they decide to just get rid of them? And my answer to that is not to worry about it.

It's a question that you should keep asking, but at this moment, you don't have to worry about it. China owns I mean, I know it sounds a lot. It's like hundreds of millions of dollars. However, because we owe so much money, because our our debt is in the trillions, that hundreds of millions of dollars is actually less than 3% of all outstanding U.S. treasuries. So I would be more concerned if Americans start selling off U.S. treasuries because more than 70 of all holdings of U.S. treasuries are actually held here domestically by the American people and American institutions.

Thank you to my colleagues, John, Sam, and our producer, Kathy, for another great year of Economic & Market Watch podcast. We're going on hiatus. We'll be back the second week of January. In the meantime, download the Economic & Market Watch brief and dashboards. Send us that sweet email at economicresearch@nrucfc.coop.

And, John, you have any last words for us?

Yes. I think we have one last message for all our dedicated listeners out there.

Happy holidays.