The S&P 500 has struggled to gain traction despite the recent decline in interest rates, with investors increasingly concerned about economic growth. The benchmark 10-year Treasury yield fell to its lowest level of the year this week, but the stock market has barely traded in the green since the start of the year.
The concerns are rooted in worries about President Donald Trump’s tariff plans and their potential impact on inflation, which may prompt the Federal Reserve to lower borrowing costs even further. Recent data has highlighted growth concerns, with consumer confidence plummeting in February due to recession fears and elevated inflation expectations.
Economists warn that rising inflation would squeeze consumers’ purchasing power, leading to lower demand for goods and lower sales for companies. This could put pressure on profit margins, forcing businesses to cut jobs and lay off employees. The Federal Reserve has already indicated it would step in to stop the bleeding, causing investors to recalibrate their expectations for future rate cuts.
The growth debate is centered around President Trump’s trade policies and immigration plans, which are seen as a negative headwind for the economy. Immigration has helped drive the US economy, but Trump’s crackdown could reduce the labor force by millions, leading to a slowdown in GDP.
Other data points have flashed warning signs, including retail sales data showing a significant decline in spending. Investors are paying attention to these trends and taking note of the potential risks to the economy and markets. Despite some optimism that the economy will continue to grow above a 2% annualized rate, economists warn that the current US economic environment is unbalanced and ripe for downturns.
Read more: How Tariffs and Immigration Policies Could Impact Your Investments
Source: https://finance.yahoo.com/news/rates-have-fallen-to-2025-lows–but-thats-not-helping-the-stock-market-132633486.html