Tariffs, Temu, and the Fed — Avory’s Market Rundown.

Happy Friday! We’ve been on the hunt for tariff-related casualties, and while there haven’t been many, Temu stands out. The cross-border e-commerce giant just saw a 58% collapse in U.S. daily users, likely tied to changes in the de minimis exemption that raised costs for Chinese goods. It marks the first clear casualty of tariff / trade enforcement, even before broader measures take hold. Interestingly, Adobe’s Digital Price Index shows that online goods are still deflating, meaning tariff-driven inflation hasn’t materialized, at least not in digital channels. That’s great news.

On the macro side, the Fed meeting came and went with little market reaction. The central bank nudged its inflation and unemployment forecasts slightly higher, but kept its rate path unchanged, still projecting a gradual glide path of cuts through next year. Our house view: markets may soon start looking past the current Fed, especially with a leadership change likely ahead. The expectation is that Trump will appoint a more dovish chair, in line with the administration’s clear preference for rate cuts.

So while geopolitical risks remain a wild card, the backdrop is increasingly supportive. Disinflation is holding, global easing is underway, and small/mid-cap valuations remain attractive. We may be entering a stretch where the next leg up is driven less by earnings beats, and more by policy tailwinds.

Here is the summary if you want just that:

• -58% decline in Temu U.S. daily active users.

• 33 months of online goods price deflation.

• 3.9% Fed Funds projection.

• Broad easing cycle now visible globally.

Let’s start with tariff impacts. Here’s a not so obvious example.

Temu was once a shopping category leader in app downloads and U.S. user engagement.

But it just experienced a 58% drop in daily U.S. users, according to Similarweb. That’s not a seasonal blip, it’s real business model damage. The reason? The U.S. tightening its de minimis rule, making it more expensive and complex to ship cheap goods from overseas directly to consumers.

The downloads are still happening for TEMU but as shown in the prior image, active users are struggling. While we don't know their customer acquisition costs, this suggests less profitable customers for TEMU, as they likely depend on repeat usage.

Now this is interesting data point.

Adobe’s Digital Price Index has now declined Y/Y for 33 consecutive months, with recent readings hovering around -3% to -5%. Categories like electronics, clothing, and furniture are driving this. This runs directly counter to tariff-driven inflation fears. It suggests that competitive dynamics and over-inventory are still keeping prices down, especially in digital-first categories.

Given the geopolitical issues around the world and this week’s Fed meeting, I wanted to share a few quick thoughts and supporting datapoints.

First, while geopolitical conflicts are always deeply concerning, history offers helpful context. We looked at how markets have responded during past periods of geopolitical stress. The conclusion? Reactions are often sharp but short-lived. Going back to 1939, the median recovery time for the S&P 500 following major geopolitical events is just 17 days. While every situation is different, markets tend to follow their pre-event trend unless fundamentals are meaningfully disrupted.

In this case, markets had already been rallying into the headlines, which likely set us up for a healthy pause. But as we move forward, several catalysts remain in place, including U.S. midterm dynamics and our view that the market will start pricing in a more dovish Fed chair, likely leaning toward rate cuts. That could help move sentiment back toward a more constructive stretch ahead.

This would bring the U.S. more in line with the rest of the world, where rate cuts are already underway. The longer the Fed stays on hold while other central banks ease, the more pressure builds for the Fed to follow suit.

Lastly, the Fed released its updated projections and largely stayed the course, no major surprises, and expectations were broadly met. The market reaction was minimal, with equities finishing flat on the day. As we noted earlier, we believe investors will gradually begin to discount the current Fed’s guidance and instead look ahead to a potential leadership transition. Trump is highly likely to appoint a more dovish Fed chair (keep in mind he appointed Powell). The administration has already been vocal about wanting rate cuts, and nominating a known dove would align with that agenda and increase the odds of a policy shift.

Here was my take on the meeting.

Have a great weekend and make sure to sign up for our webcast in two weeks! We will send out a reminder next week!

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Avory specializes in high-conviction equity strategies, emphasizing Secular Growth and Transformation Stories driven by exceptional teams. Data guides decisions. We cater to high net worth investors, family offices, and institutional investors. Note: This information doesn't constitute a recommendation to buy or sell any mentioned securities. Avory is based in Miami, Florida with clients all across the globe.

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Disclaimer: Not a recommendation to purchase or sell any securities mentioned. This is for educational purposes only.