US stocks have surged back from their April lows, with the S&P 500 closing at a record high on Friday. However, as Greg Daco of EY warned, the tariffs imposed by Donald Trump could accelerate inflation in the US, leading to income erosion and a consumer spending slowdown in the second quarter of 2025.
The latest US inflation data has only reinforced these concerns, as price growth remains stubbornly above the Federal Reserve’s target. Daco notes that the rising uncertainty is creating a challenging environment for policymakers, including the American central bank.
While some Fed officials are keeping July rate cuts on the table, Daco believes the regulator will likely hold off until September, given the anticipated further slowdown in the US economy.
Despite these risks, investors remain bullish as stocks continue climbing, led by tech and financial shares. Truist’s Keith Lerner sees further gains ahead for the S&P 500, citing potential tax reform, Trump’s deregulation push, and possible Fed rate cuts as key catalysts.