"At the start of the year, a lot of people were worried that 2025 would be a rocky year for stocks given President Trump's plan to implement strict tariff policies. Those policies have since driven costs upward for consumers and created an unquestionable air of economic uncertainty. Consumer confidence is down, and the U.S. unemployment rate just reached its highest level in years."
"Despite all of that, the stock market has soared. The S&P 500 index, which is typically considered a benchmark for the performance of the market as a whole, is up about 16% this year. But the news isn't all good. A new study by the Federal Reserve suggests that tariffs will lead to a near-term slowdown in economic growth. That could prove problematic given that the S&P 500 now trades at one of its highest valuations in decades."
"Still, investors shouldn't get too comfortable with the fact that the S&P 500 is trading at above 23 times forward earnings, markings one of the index's most expensive valuations in decades. When stocks are overvalued, it tends to signify that the market may be overdue for a correction. That itself shouldn't sound alarms, since stock market corrections are fairly common."
Tariff policies have driven consumer costs higher and created significant economic uncertainty. Consumer confidence has fallen while the U.S. unemployment rate recently reached its highest level in years. Despite these weakening fundamentals, the S&P 500 is up about 16% year-to-date and trades above 23 times forward earnings, marking one of its most expensive valuations in decades. A Federal Reserve study finds that tariffs will cause a near-term slowdown in economic growth and increase unemployment. The divergence between soaring stock prices and deteriorating economic indicators raises the risk of a market correction, and possibly a deeper, prolonged downturn rather than a quick rebound.
Read at 24/7 Wall St.
Unable to calculate read time
Collection
[
|
...
]