A rally from the end of April 2025 in the S&P 500 has caused a wave of investor optimism, and some claim that the market has completely absorbed the effects of President Trump’s tariffs. However, this optimism can be premature.
The key indicators point to winds against significant ahead. The rooted inflation and a resolutely aggressive federal reserve, the dull corporate profits accompanied by downward reviews, the growing geopolitical tensions and the imminent risk that tariffs affect US consumers have not yet materialized.
These factors suggest that market challenges are far from finishing.
Investors who look at a defensive position, such as assigning capital to physical gold or traditionally resistant sectors such as public services, have convincing reasons to prepare for turbulence in the short term.
Sticky inflation and a resistant fed
Despite the aggressive increases in federal reserve rates in the last quarters, inflation has proven more resistant than expected, since the consumer price index increases 2.4% year after year in March. The Fed has made it clear: fees cuts are unlikely until inflation is decisively approaching its 2%target.
This position, which contrasts directly with the vocal demands of President Trump for lower rates, raises a double threat, pressing capital assessments and restricting consumer expense. In addition, if the expectations of imminent rates cuts have supported the strength of the recent market, any change in that perspective could cause renewed volatility in all classes of assets.
Weak profits and downward reviews
In multiple sectors, several companies have had a lower performance in the most recent quarter due to the decrease in income and income failures, among other factors. Finnair and American Airlines Group companies (Nasdaq 🙂 Each published losses, and the latter among several US operators will withdraw their term orientation of 2025 per full year due to uncertainty in the market.
The pharmaceutical giant Bristol-Myers Squibb (Nyse 🙂 Co. also pointed out a quarterly loss while cutting its profit estimates throughout the year and announced plans to reduce up to 2,200 positions.
Meanwhile, the electronics manufacturer Kimball Electronics Inc. reported disappointing net sales, decreased due to the decrease in sales in its industrial, medical and automotive lines in the midst of continuous tariff concerns.
To be clear, not all companies that report the profits of the first quarter of 2025 have lost the expectations of analysts.
However, with each company, industry or successive sector that offers disappointing results, the broader perception of market health continues to deteriorate, increasing concerns about the strength and sustainability of current economic expansion.
Geopolitical risks remain and grow
One of the most pressing geopolitical risks faced by US consumers and companies is the growing commercial conflict between the Trump and China administration. At the end of April 2025, the United States has imposed tariffs of at least 145% to Chinese imports, which affects approximately $ 440 billion based on figures from 2024. Without significant progress towards a commercial resolution, it is increasingly unlikely that consumers or importers will soon see relief of these high costs.
Meanwhile, instability in the Middle East continues to shake the energy markets. Although oil prices have recently decreased, partly driven by a greater production of OPEC+nations, underlying tensions remain acute. The greatest friction between the United States and Iran, along with a continuous conflict in Gaza, threatens to inject greater volatility into an already fragile global panorama.
The uncertainty of the tariff continues
The markets experienced a significant turbulence earlier this year with a wave of rates ads that affect imports from several countries. After a series of fast fire statements and later pauses by the Trump administration in early April, the United States has embarked on a burst of commercial negotiations with dozens of nations.
However, unless these agreements materialize, suspended tariffs are expected to be restored later in the year, preparing the scenario for the volatility of the renewed market.
China’s American tariff landscape is also ready to intensify. If the administration expands the tariffs of critical technology imports, consumers could face a strong increase in electronics prices and other technological goods. At the same time, the possible measures of retaliation of Beijing, particularly the restrictions in the exports of rare earth minerals essential for the manufacture of high technology, represent a serious threat to supply chains and could seriously affect the selected technology companies and the broader capital markets.
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