1. Fed officials expect cooling inflation may allow two future 25-basis point cuts. 2. Uncertainty in Trump's trade and immigration policies may alter the Fed’s course. 3. Tariff worries could increase costs, pressuring consumer prices and profit margins. 4. Stable labor market coexists with inflation above target, driving cautious policy moves.
The article outlines a mixed outlook. Although anticipated rate cuts can support stocks, policy uncertainties and potential inflationary pressures from tariffs could counteract positive effects. Historical instances, such as prior mixed messaging from policymakers, have led to market volatility.
Macroeconomic policy uncertainty is significant for the S&P 500 in influencing earnings and valuations, though the overall impact remains moderate without a clear trend shift.
Upcoming Fed meetings and near-term policy decisions make market reactions immediate. Similar past episodes have triggered short-term fluctuations in major indices.