The stock market has experienced significant disruptions this week due to rising inflation and tariffs, undermining investor confidence.
The Impact of Inflation on the Market
All major indexes plummeted after inflation data triggered a sell-off. The S&P 500 fell nearly 2%, with the Nasdaq and Dow also declining. The Fed's preferred inflation gauge—the core PCE—rose 0.4% in a month. Year-over-year, it hit 2.8%, well above the Fed’s 2% target.
UBS Adjusts S&P 500 Forecast
UBS downgraded its S&P 500 target for 2025 to 6,400 from 6,600 due to a 25% tariff on auto imports. Political instability and uncertainty will keep the stock market volatile. The banking sector, however, sees opportunities for recovery if trade policy improves and AI investments succeed.
Triple Threat: Inflation, Tariffs, and Weak Sentiment
This week wasn't just about inflation; it was also about tariffs and declining consumer sentiment. The University of Michigan's sentiment index hit a new low since late 2022. Rising prices and trade uncertainty took a toll on tech stocks. Amazon and Alphabet lost over 3%, while Lululemon plunged 14%.
Amid high volatility and uncertainty, investors have nothing left but to wait for Fed actions or improvements in trade policy. Meanwhile, patience is needed while monitoring market changes in anticipation of a possible recovery.
