CEO Roundtable: The Economy

Each month, we gather around the table with a different group of Springfield business leaders to discuss industry trends. Join us as we get a behind-the-scenes look at our business community from the C-suite.

Springfield Business Journal Executive Editor Christine Temple discusses the complex state of today’s economy with Andy Drennen, vice president and senior portfolio manager at Simmons Private Wealth; David Richards; senior vice president and senior portfolio manager with Commerce Trust; and Justin Setser, senior vice president and regional chief investment officer with Central Trust Co.

What follows are highlights from the conversation, edited for length and clarity.

Christine Temple: Uncertainty seems to be the word of the year, kind of at the top, at least, of 2025, and maybe into the middle of it. Curious, what’s the word now? How would you all describe the economy?
Andy Drennen: AI boom or bubble seems to be the topic du jour. Lot of money being spent into AI. We started the year off with tariffs and kind of a questionable market outlook. And then … AI kind of took over that. We’ve seen huge investments; $350 billion is estimated this year.
Justin Setser: Yeah, obviously AI … you can’t turn on any newscast or listen or read any article without AI being there. But I honestly would kind of echo the same word, honestly, (in) 2023, 2024, 2025 and still today – uncertainty – right? There’s been a lot of talk about a recession the last couple of years, and the uncertainty around tariffs, around if we are in a bubble. Interest rates being a little bit lower should help. But the economy is moving along well, but it’s softening and slowing. So, there is still some uncertainty, I think, with where we currently are.
David Richards: So, I think there’s always uncertainty in the market, which is why we have buyers and sellers and creative markets. I bifurcate capital markets from the economy a little bit. … in the investment world, it’s AI and then the investments and financing, all those things that come along with it. In the economy, though, it seems like we’re beginning to pivot to the labor market. We’re catching a lot of attention. We’re beginning to see data that’s maybe not consistent, different interpretations of the data we’re getting, I guess. Undoubtedly, we have a weakening labor market. But weakening from periods of over-strength, probably, four years ago, and job creation has ultimately slowed. But labor supply has definitely decreased as well, so lot of ambiguity over where that equilibrium is, and subsequently, what’s the Fed do in response? Do they continue to lower interest rates because labor market is decreasing or weakening at the expense of allowing inflation to continue to run high?
Setser: And I would even add one more kind of term that’s become pretty popular, and that’s K-shaped economy. You know, those who have owned investments and real assets have prospered over the last couple years, because those investments have gone up. And then those in the lower-income thresholds, inflation has really hurt them, and it has really become a challenge for them to afford the normal things in life.

Shifting tariff burdens
Temple: June to October of this year, it’s estimated that U.S. tariffs generated about $29 billion in revenue. So far, the thought is that maybe the businesses, the retailers, have been taking on some of this burden, but now it’s shifting to the consumer, and we’ll see that even more in 2026.
Richards: Our research says that that cost of tariffs (is) being divided currently about equally between the producer, between the retailer and between the end consumer. There is pricing power, undoubtedly, when we talk about that K shape, so those that are at the high end of the retail market are passing along much more than those are at the lower end of it. But our research also indicates that retailers have done this intentionally not to pass along the entire price increase immediately, but (they) anticipate passing along that price increase gradually over time and allow consumers to digest 1%-2% appreciation per quarter. It’s inflationary. This is confrontational, because I know there’s administrative personnel that said it’s a one-time price hike, it’s not inflationary.
Drennen: If we backtrack to earlier this year when tariffs were first making their appearance, at the end of last year, we saw a lot of companies load the boats from China and wherever their supply chain was, and bring that here, ahead of the tariff discussion. That happened and … the (tariff) wars were crazy: 135% you know, just nuts, what was happening, and that seemed to have subsided. But I agree with Dave. I think inflation, the Fed saying it’s not going to be that much next year – I don’t know about that, because what I think happened is, whenever they loaded the boats, they weren’t really running a lot of sales. They were trying to retain their inventory, to outlast, you know, the wars that were happening. And so I think that time has already passed, and they’re having to go and purchase and restock the shelves at higher prices, which is going to have to – in my opinion – translate down into higher inflation … but also hurt the lower consumer.
Setser: Some of our clients are in the retail space, and we’ve heard that that they were able to stock up on inventory even before Liberation Day. You know, [President Donald] Trump has run on tariffs. It’s been his thing forever. And so they were able to load up on inventory, sell some of that lower-cost inventory, slowly pass the price increases through to the consumer. And I would agree it is up for discussion and debate, if these are a one-time increase in price, they’re one-time tax, or (if) they flow through over time. You know the Supreme Court decision [on tariffs] will be pretty interesting. We’re already seeing Trump reduce some tariffs, or remove tariffs, on fruit and beef and one other item from Brazil …
Richards: Coffee!
Setser: Coffee, yeah, for us coffee-drinkers, right? Coffee, fruit and beef. You know, those things that a lot of Americans, especially at the lower end of the K-shape, are feeling. You go buy a steak at the grocery store, it hurts, or buy beef, it hurts. And so I think the administration is realizing that some of these are rolling through at higher prices. There’s obviously a midterm election next year. That affects things. So the Supreme Court, even some of the Republican justices have certainly questioned Trump’s power under the (International Emergency Economic Powers) Act, and so he still probably can implement some tariffs through other ways, if they would shoot him down. … I’m not hopeful that we will see higher prices, But I wouldn’t be surprised here over the next 3-6 six months, if you look at the shape of that inflation curve over the last four months, as Dave alluded to, it has been a slow, steady tick up. And even if you listen to CEO quarterly calls, there are a lot of them –especially those that are bringing a lot of their products from overseas – kind of waving a cautionary tale here that could continue over the next six months.
Richards: The worst thing that’s been about these tariffs is the uncertainty that they created. And Justin just alluded to that with the CEO comments. And they continue. … For us sitting around this table consuming those goods, not a big deal. It all levels out. But if I’m running a business, it’s a massive deal. Am I able to buy those supplies, and at what price? And God forbid, if I buy them, and there’s 120% tariff, I’ve got to turn around and try and sell those at a profit. That uncertainty, I believe has resonated what Andy alluded to earlier, and that’s the labor market, specifically with young people coming out of college. That is the one piece of labor market I truly believe is weak right now. AI undoubtedly has taken some of those entry-level jobs, but I also believe there’s just a corporate feeling right now we’re a little hesitant to bring in that next generation, because our growth plans aren’t solidified. So, I don’t believe it matters where tariffs end up. They could be 15%, they could be 20%. Businesses will adjust. Consumers will adjust, wages will adjust commensurate with whatever the inflation rate is. And we can move forward. But when we oscillate like we have, it just creates some massive uncertainty, primarily for business owners, but ultimately for consumers as well.

Excerpts of the conversation by Deputy Editor Gregory Holman, gholman@sbj.net.