Pulling at the Threads: Understanding the Economy Right Now

I became a financial advisor because I believe people make better decisions when they understand what’s going on around them. But right now, understanding what’s going on feels almost impossible. The news is loud, fragmented, and designed to make you react, not think.

So I started doing something for my clients that I want to share more broadly: every two weeks, I sit down and pull at the threads connecting the stories that actually matter. Not all of them are economic. Some are about the institutions we depend on, the policies being shaped in our name, or the forces beneath the surface that haven’t yet hit the headlines.

My goal is simple: when you finish reading this, I want you to understand something you didn’t before. Not to feel scared. Not to feel outraged. Just to see how the pieces fit together—because when you see the connections, you make better decisions about your money, your family, and your future.

Why the Economy Feels So Uncertain Right Now

The conversations I’m having with clients right now all center on the same feeling: the ground shifted, and nobody told them.

Almost nobody sitting across from me is asking for more. They’re not looking to upgrade their lifestyle or take on risk for a bigger house. They just want to keep what they have. And more and more of them are finding that even that is getting harder.

What I hear most often, and it breaks my heart every time, is the worry about their kids. That their children won’t have the same opportunities they did. That nothing seems affordable anymore. That they want to help the next generation, but they’re already stretched thin just maintaining their own lives.

Many are caught in the middle—caring for aging parents whose long-term care costs are staggering, while simultaneously trying to set their kids up for a future that feels more expensive and less certain than the one they had.

The Real Issue: The Old Economic Signals Aren’t Working

I keep pulling at why this feeling is so pervasive right now, and I think it comes down to something specific: the systems we’ve relied on to understand the economy have quietly stopped working the way we think they do.

The signals we watch: jobs reports, insurance coverage, price tags, market performance, don’t mean what they used to mean.

And until you see that, you’re navigating with an outdated map.

That’s the thread running through everything in this issue: The old rules don’t apply anymore.

Inflation and Consumer Behavior: The $7 Bag of Doritos

When Prices Outpace Reality

I want to start with something everyone can relate to: a bag of chips.

At Walmart, the price of a “party size” bag of Doritos went from $3.98 in 2021 to $5.94, and in some stores, past $7. That’s a 50% increase, according to consumer spending data from Attain, as reported by Bloomberg. For context, overall food prices rose about 25% in that same period. PepsiCo raised prices roughly 40% significantly faster than inflation justified.

At first, consumers absorbed it. But something happened in 2023 that economists call “demand destruction.” It’s a simple concept with profound consequences: prices rose so high that consumers didn’t just cut back, they permanently changed their behavior. They discovered store brands. They switched to competitors. They stopped buying chips altogether.

The numbers tell the rest of the story. Frito-Lay, PepsiCo’s snack division, had posted revenue growth for 53 consecutive quarters. Then volumes started declining—1% in 2023, accelerating to 2.5% in 2024. The division missed its internal revenue targets by over a billion dollars two years in a row. Walmart, their biggest retail partner, had been warning PepsiCo for over a year that prices were too high. When PepsiCo didn’t listen, Walmart took their shelf space and gave it to cheaper alternatives. PepsiCo’s market value dropped $50 billion from its 2023 peak.

In February, PepsiCo finally announced price cuts of up to 15%. CEO Rachel Ferdinando said consumers “told us they’re feeling the strain.”

I’m including this because it’s the Affordability Question in miniature, and I want to keep pulling at it in future articles. When a company raises prices faster than people’s wages are growing, there’s a breaking point. And once consumers cross it, they don’t come back easily. That’s not just a story about Doritos. It’s happening across the economy—in healthcare, in housing, in insurance, in groceries. The gap between what things cost and what people earn keeps widening, and the breaking points are arriving one by one.

What This Means for You: Inflation, Pricing Power, and Investment Risk

Demand destruction works in both directions. It’s punishing companies that overreached on pricing, creating opportunities for value-focused investors.

But it’s also a warning sign: when consumers are this price-sensitive, the economy is more fragile than headline GDP suggests.

If oil prices continue rising through the summer, as I discussed in our last issue, food prices will face additional upward pressure. Companies trying to cut prices to win consumers back will be swimming against a current of rising input costs.

Jobs Reports and the Labor Market

Why the Data Misleads

If you watched the headlines in February and March, the jobs data looked like a rollercoaster. February posted one of the sharpest employment declines outside of a recession. March rebounded dramatically—the biggest monthly gain since late 2024. If you were watching cable news, you either panicked in February or relaxed in March.

Both reactions were wrong.

Here’s what actually happened, and it’s something I think every client should understand: the U.S. labor force has effectively stopped growing. Not temporarily. Structurally.

The combination of more restrictive immigration policies and long-running demographic trends—lower birth rates and an aging population—has reduced net labor force growth to essentially zero. Research from Brookings found that net migration was likely close to zero or negative in 2025 and is very likely to be net negative this year. A Federal Reserve staff paper published April 2 confirmed the math: when labor force growth is near zero, the number of jobs the economy needs to add each month just to hold unemployment steady is also near zero.

That means negative monthly job prints, the kind that used to signal recession, will start happening routinely. Not because the economy is collapsing, but because the workforce isn’t growing. This is a fundamental change in how the economy works, and almost nobody is talking about it.

The broader implication is what keeps me up at night. The formula for GDP growth has always been simple: labor force growth plus productivity growth. If labor force growth is zero, the entire burden of maintaining our standard of living falls on productivity, which increasingly means artificial intelligence. The Congressional Budget Office had projected trend GDP growth at 2% based on 1.5% productivity growth and 0.5% labor force growth. Remove the labor component, and trend growth mechanically drops to 1.5%—unless AI delivers a productivity surge never before achieved.

What This Means for You: How to Read Jobs Reports and Economic Data

If you’ve been watching monthly jobs reports to gauge whether to buy a house, refinance, or worry about your portfolio, the old signal doesn’t apply anymore.

Weaker payroll numbers don’t necessarily mean the economy is in trouble, and strong numbers don’t necessarily mean it’s healthy.

The unemployment rate and broader economic indicators matter more now than headline job gains.

And if you’re planning for the long term, the question of whether AI can actually boost productivity enough to sustain growth isn’t a tech question; it’s a question about your retirement.

Why Market Integrity and Trust Matter More Than Ever

In 2004, Martha Stewart was convicted and sentenced to five months in federal prison. Her crime: lying to investigators about a stock trade that saved her roughly $45,000.

I thought about that number when I read what PBS NewsHour reported recently. According to the Financial Times, someone placed more than $500 million in oil futures trades approximately 15 minutes before a presidential announcement about pausing planned strikes on Iranian power plants. The timing could be coincidental. But it produced a windfall.

That’s not an isolated incident. On prediction markets like Polymarket, a brand-new account wagered over $30,000 that Venezuela’s president would be removed from office. Hours later, the administration captured him. The bet paid out $400,000. Newly created accounts bet $160,000 on a ceasefire with Iran; after presidential comments, those positions doubled. The Financial Times also reported that Defense Secretary Hegseth’s own stockbroker sought to make investments in a defense ETF before military action, but the Pentagon denied the report.

The pattern is clear enough to have produced bipartisan legislation. Republican Senators Todd Young and John Curtis joined Democrats Elissa Slotkin and Adam Schiff to introduce the Public Integrity in Financial Prediction Markets Act, which would bar federal officials from using insider information on prediction markets. Senators Warner and Schiff sent formal letters to the SEC and Pentagon demanding investigations. There are now at least eight bills in Congress addressing this.

Here’s the number that troubles me most: according to the Pew Research Center, only 17% of Americans trust the federal government to do what is right. In 1964, that number was 77%. When markets are perceived as rigged—when someone can place a half-billion-dollar bet minutes before a presidential announcement, and no one faces consequences—that trust erodes further. And trust is not abstract. It’s the foundation of every market transaction.

What This Means for You: Market Trust, Regulation, and Long-Term Investing

For long-term investors, market integrity is not a political issue; it’s a structural one.

If you’re investing in index funds or holding diversified portfolios, you’re participating in the same markets where these trades are happening.

The bipartisan legislative push is worth watching: if meaningful regulation passes, it would be a positive signal for market integrity.

If it doesn’t, the erosion of trust will continue to be a headwind, particularly for retail investors who don’t have access to the information or timing that insiders apparently do.

How to Make Better Financial Decisions in an Uncertain Economy

Every story in this article comes back to the same realization: the systems we’ve relied on to understand the economy have quietly broken, and the signals we use to navigate them have stopped meaning what they used to.

A bag of chips is supposed to cost a few bucks, but when it hits $7, something breaks that’s very hard to fix. Jobs reports are supposed to tell us whether the economy is healthy, but the formula changed without anyone announcing it. And markets are supposed to be fair, but someone is placing bets worth hundreds of millions of dollars minutes before presidential announcements, with apparent impunity.

Seeing these connections doesn’t mean panicking about them. It means understanding that the map has changed, so the way you navigate needs to change, too. That’s what I try to help people do every day.

If something here raised questions about your own situation—how to interpret the next jobs report, whether demand destruction affects your portfolio, or how to think about market integrity—those are exactly the conversations we have with our clients at Sherwood. Feel free to reach out if you’d like to talk it through.