Stocks came back quickly and historically from the bottom of April market, with the S&P 500 (^Gspc) Close at the highest record ever on Friday.
Now, as the first half of 2025 pulls up, overarching risks are almost all removed. From the pressure of tariff -driven inflation to conflicting economic signals and walled data, what lies ahead is anything but simple.
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“We're going to see inflation revisiting that will be stimulated by a tariff,” Ey chief economist Greg Daco told Yahoo Finance on Friday. “There is more pressure to enter the economy (which will lead to) income erosion and slow down consumer spending. That's the picture we should expect in the second half of this year.”
The latest reading of the Federal Fund Preferred Inflation Gauge Reflecting some of those concerns, with price increases accelerating in May as inflation remains above the Fed's 2% target in the midst of fundamental signs of slowing economic growth.
“The wide picture is that we are going to be in an environment where we are going to see more fog in the data at the same time as there is more fog of policy uncertainty,” said DCO, adding that it is a “unpredictable combo for anyone looking to plan for the next few years.”
That includes the Federal Fund, As policy makers walk a light line When discussing potential rate cuts. And while some officers have been fed has reopened the door to a cut in JulyDaco believes the bar remains high.
“I think we shouldn't expect a rate cut in July,” he said. “The majority of FOMC voting members are not aboard the ship.” Instead, Daco sees September as the more likely pivot point, with economic momentum expected to cool further in the coming months.
“I would have seen more erosion of demand, I would have seen a labor market that unfortunately has slowed down, and the growth of income as a result has slowed down,” the economist explained, noting that this slowdown could override the risk of near-term inflation revisiting tariffs.
“The Fed will have to decide, on the side of the warning, to focus more on the slowdown of growth because the inflation effect is likely to be short -lived.”
However, those economic concerns have not weighed heavily on investors. Markets have powered higher, led by strength in technology and financial, such as Rebounds of consumer feeling and traders spend Increasing clarity on trade policy.
“Markets are starting to focus on some of the more positive growth aspects,” said Keith Lerner, a co-chief investment officer in truist, ultimately highlighting the passage of President Trump's tax billDeregulation efforts, and the expected arrival of the rates cuts. “So I think everything that makes the market move higher,” he added. “But there will certainly be some gut checks along the way.”
