The U.S. economy shrank by 0.3% in the first quarter of 2025—its first contraction in nearly three years. The decline is being viewed largely as the result of temporary disruptions rather than a sign that the economy is heading into a prolonged downturn.
A big reason for the dip was a surge in imports and slowing consumer spending. Businesses rushed to bring in goods before new tariffs took effect, which caused a record trade deficit. That trade imbalance weighed heavily on GDP, even though the underlying economic activity was relatively stable. This doesn’t necessarily mean demand is drying up—it’s more about the timing of those imports and their impact on the government’s math for calculating GDP. Consumer spending, while still positive, slowed to 1.8% growth compared to over 3.7% in the last quarter of 2024. This pullback was mostly due to harsh winter weather and a typical post-holiday lull. Meanwhile, business investment looked strong on the surface, but much of it was companies front-loading purchases ahead of the tariff changes. That means it might not carry through into the rest of the year. Government spending also declined, as the administration rolled out budget cuts and layoffs that contributed to the overall drag.
Despite the negative GDP print, this isn’t a recession. One quarter of contraction doesn’t make a trend. However, if tariffs continue to weigh on trade and if consumers become more cautious in the months ahead, the risk of a more sustained slowdown could grow. That said, we should probably view the first-quarter numbers as a moment of adjustment rather than a trend.
But investors will be closely watching trade policies, inflation, and consumer confidence in the second quarter, along with any economic data that is released. These will be key indicators of whether the economy finds its footing—or stumbles. WSJ
Financial Planning/Investment Strategy Corner:
Monte Carlo Financial Projections: Imagine you’re planning a long road trip, but you don’t know exactly how much gas prices will fluctuate, what the weather will be like, or if your car will have any issues. To prepare, you could run a bunch of different "what-if" scenarios—like, what happens if gas gets really expensive? Or if you hit a lot of traffic?
Monte Carlo simulations do something similar for financial planning. Instead of predicting just one future outcome, they run thousands of possible scenarios using random variations for things like stock market returns, inflation, and unexpected expenses. This helps estimate how often your financial plan will succeed under different conditions (like making it to your road trip destination).
If, after running 1,000 simulations, your plan succeeds 80% - 90% of the time, that’s a strong sign you’re on track. If it only succeeds 50%, or less, of the time, you might need to save more, spend less, or adjust your investments. It’s a way of stress-testing your financial future against uncertainty.
The highest Monte Carlo simulation score is 99%, as it won’t give out a 100%, or definite certainty, on a plan. But as Financial Planners, what we frequently find is that clients always want the highest score possible. They want a 95% or 99%. I think it stems from wanting to get a very high score in a class, like probably many of them tried to do in school and college, and they want to receive an A+. But that is the wrong way to think about it. Your accumulated wealth is there to provide for a comfortable and fulfilling retirement. By scoring extremely high, clients “are leaving money on the table,” so to speak, that could otherwise fulfill personal goals. In this vain, I have created my own grading system for clients to ponder as they contemplate their financial projections:
David’s “subjective very unscientific” Monte Carlo success rate grading system:
<55% – F
55% – 65% – D
65% – 75% – C
75% – 80% – B
80% – 90% – A
90% – 95% – B
95% – 99% – C
There is nothing wrong with having excess assets after your plan ends for giving an inheritance or to charity, but don’t leave personal goals unfulfilled just because you want to get the highest score possible. The Basics of Monte Carlo Simulations – Investopedia
Quick Hits:
- The 5 Best Full-Body Exercises, According to Trainers: NYT
- It’s asparagus season, here are 19 creative and healthy recipes: Forks Over Knives
- Americans are obsessed with protein and it’s driving nutrition experts crazy: WSJ
- Saunas have become the hot new thing: The Economist Vogue
- Does a wine’s “vintage” actually matter? WSJ
Peter Attia and Aging Well: I am a big fan of Peter Attia’s books and podcasts to help people understand exercise and nutrition to help them live better lives (if I actually put all this info to use is another story…). What I don’t particularly like about his style though is that he uses a lot of jargon and it is always very dense material and concepts that are difficult to understand and follow. So I was quite thrilled to listen to a recent podcast when he sat down with his daughter Olivia for a conversation inspired by her volunteer work at a senior living center. Together, they share practical tips with residents on how to improve both lifespan and health span.
The episode mainly focuses on lifestyle changes for preventing his “Four Horsemen” of chronic disease - heart disease, cancer, neurodegeneration, and metabolic issues. Peter also highlights strength training for mobility/independence, the importance of adequate protein intake for muscle health, staying hydrated as you get older, and discusses how quality sleep supports brain function. They also touch on the value of emotional well-being, emphasizing connection and purpose. If you give it a listen, I think you’ll find it easy to understand, actionable, and applicable for helping older adults age with vitality (younger adults too!). The Drive Podcast by Peter Attia, Episode #342
Golf Season: It’s golfing season again in New England. And if you are an occasional golfer, such as myself, I’m always looking for some simple basic tips to keep from embarrassing myself.
Five simple golf tips that could help you improve your game | Golf Monthly
Golfing in WW2: Speaking of golf, I came across the image below that listed golf rules for a club during wartime in London. And to think I’m worried about trees and sandtraps when they had shrapnel, craters, and bombs to navigate! Rules Throwback: Golf During World War II
Quote: “Golf can best be defined as an endless series of tragedies obscured by the occasional miracle.” Anonymous
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