1. May's retail inflation was 2.4%, lower than expectations. 2. Tariffs take time to reflect in consumer prices. 3. Fourth quarter will see significant price increases. 4. Consumer behavior changes in response to anticipated price hikes. 5. Inflation could accelerate, impacting wages and pricing.
Historically, perceived inflation leads to stock price appreciation as consumers begin purchasing early, boosting retail sales initially. However, expected inflation in Q4 could lead to higher costs overall, raising concerns for long-term valuations.
Higher prices stemming from tariffs influence consumer spending and inflation expectations, which directly affect S&P 500 companies, especially in retail.
The immediate effects on consumer behavior and retail orders will manifest soon but could worsen in Q4 due to rising costs.