1. IMF lowers U.S. economic growth forecast for 2025 to 1.8%. 2. New tariffs raised effective U.S. tariff rates to a century-high. 3. Global growth expected to slow due to policy uncertainty. 4. U.S. inflation forecast for 2025 increased to 3%. 5. Odds of U.S. recession rise to 37% from 25%.
The IMF's growth downgrade is likely to dampen investor sentiment, much like past events when economic forecasts were revised downward, such as during the 2008 financial crisis when the S&P 500 faced significant declines due to lowered expectations. Trade tensions and tariffs also suggest reduced corporate profitability, impacting S&P 500 companiesensitive to consumer spending and global supply chains.
The report highlights key economic indicators—growth and inflation—that typically drive market behavior. Significant downgrades by the IMF hold weight, affecting investor confidence and potential actions by the Federal Reserve.
Immediate reactions in the market typically follow significant economic forecasts, such as last year's downturn when inflation data was released, causing S&P 500 volatility. The anticipated slowdown in economic activity could trigger quick adjustments in stock prices reflecting reduced growth expectations.