After a turbulent period following President Trump’s April 2 tariff announcement, major stock indexes have experienced a remarkable recovery. Yahoo Finance reports that the S&P 500 has added $9 trillion in market value in just over a month. However, despite the recent gains, experts are expressing concerns that the rally might have been overly optimistic, potentially overlooking the economic challenges posed by high tariffs.

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According to data from the IndexBox platform, the effective US tariff rate remains historically high, which could impact economic growth and consumer spending. EY’s chief economist, Gregory Daco, highlighted that while the probability of a recession has declined, the economic growth forecast remains modest. Daco projects a GDP rise of just 0.6% in the final quarter of 2025, with real consumer spending expected to grow by 2.2% in 2025 and slow further to 1.1% in 2026.

Market sentiment has shifted significantly, with discretionary investors moving back to an overweight position in stocks, as noted by Deutsche Bank’s US equity strategist Parag Thatte. The expectation of potential tariff rollbacks and exemptions is contributing to this optimism. However, JPMorgan Chase CEO Jamie Dimon has warned of an “extraordinary amount of complacency” in the markets, suggesting that risks of stagflation, where economic growth slows while inflation rises, still exist.

Charles Schwab’s chief investment strategist, Liz Ann Sonders, echoed these concerns, noting that while investor sentiment has improved from historically low levels, the market could face downside risks if a negative catalyst emerges. Despite recent data showing a decrease in core producer prices and consumer prices falling to their lowest level in years, the potential for inflationary pressures remains a concern.

Source: IndexBox Market Intelligence Platform