This call was hosted by Prosperity Planning, a Registered Investment Advisor. Marci provided her own analysis and views on the economy, and her comments should not be construed as investment advice. Please consult Prosperity Planning for investment advice as it pertains to your specific needs. See below for a written summary and highlights of Marci’s key talking points.
During an economic update call on Monday, October 23rd, 2025, for clients and friends of Prosperity Planning, Inc., economist Marci Rossell, PhD, offered her perspective on several timely economic themes. The discussion centered on tariffs, Federal Reserve policy, and the evolving role of artificial intelligence (AI) in shaping market dynamics.
Rossell began by examining the recent increase in U.S. tariff rates, describing a shift away from the historically low, rules-based trade framework. She referenced the Smoot-Hawley Tariff era of the 1930s to illustrate how current levels echo past protectionist policies. While acknowledging that tariffs can disrupt economic momentum, she emphasized that they are not inherently recessionary—particularly when anticipated. She pointed to China’s strategic actions, such as halting U.S. soybean imports and releasing rare earth elements into global markets, as signs of preparation for heightened trade tensions. Though not immediately recession-inducing, Rossell cautioned that such measures could dampen long-term growth.
Turning to monetary policy, Rossell addressed the Federal Reserve’s current balancing act. Inflation remains above the Fed’s 2% target, yet interest rates have begun to decline in response to labor market signals. She noted that short-term rates have dropped more quickly than long-term rates, resulting in a steepening yield curve. This trend, she explained, is partly driven by the capital-intensive expansion of AI infrastructure—particularly data centers—which is absorbing significant investment and contributing to elevated long-term rates. She also observed that many companies are holding steady on hiring decisions, not due to weak demand, but because of uncertainty surrounding AI’s future impact on workforce structure.
Rossell then shifted to the topic of AI adoption, noting that the percentage of companies integrating AI has doubled over the past year—from 20% to 40%. While she believes AI will be a major driver of future growth, she outlined several obstacles. First, the expansion of data centers is constrained by utility and infrastructure limitations. Second, there is a lack of “complementary technology” akin to the smartphone’s role during the Internet boom—she cited VR headsets as not yet ready for mass adoption. Third, she highlighted the importance of trust and human interaction, particularly in service-oriented industries. Rossell suggested that AI’s full economic impact may take five to seven years to materialize.
In response to a question about market valuations, Rossell acknowledged that many leading tech stocks appear richly priced. However, she noted that unlike previous speculative bubbles, these companies are generating real earnings, which may help soften any future correction.
Rossell also addressed concerns about the federal deficit, which currently exceeds 6% of GDP. She explained that financial markets continue to support government borrowing, partly due to optimism that AI-driven productivity gains could offset future debt burdens. She expressed confidence that if market sentiment were to shift, the U.S. could reduce its deficit—as it did in the late 1990s—but only under pressure from rising interest costs.
Finally, Rossell discussed the labor market implications of AI. She noted that while AI may eventually help address demographic challenges, its near-term impact is likely to be felt most by younger workers. As companies navigate workflow changes, entry-level opportunities may be limited. However, she emphasized that AI is more likely to enhance labor than replace it. Drawing a comparison, she said, “When the tractor came along, it literally replaced people in agriculture. When the spreadsheet came along, it didn’t replace accountants—it actually made accountants much more valuable.” Rossell believes AI will follow the spreadsheet model, creating new roles and increasing productivity over time.
As always, Marci’s insights provided a thoughtful lens through which to view today’s economic headlines. Her commentary helped frame the challenges and opportunities ahead as markets continue to adjust to rapid technological and policy shifts.
In case you missed it, we have also included a full recording of our call with Marci.
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