"there is something beneath the surface that cannot be ignored, and it's something most investors don't want to hear, and advisors don't want to acknowledge. The stock market's 16% rally is increasingly detached from the underlying economic reality we're in right now. Research coming out of the Federal Reserve is linking President Trump's tariff policies to meaningful job losses and slower growth. At the same time, the S&P 500 is trading at valuations last seen only two times in the last 40 years."
"Interest rates are falling, but inflation has remained a sticky talking point, and corporate earnings growth has slowed compared to previous years. You also have the idea that consumer spending is showing signs of fatigue and that credit stress is also quietly increasing in certain markets, and yet, the market climbed anyway in 2025, thanks to large-cap tech and AI-related stocks."
The S&P 500 rose just over 16% in 2025 while underlying economic indicators diverged. Federal Reserve research links President Trump's tariff policies to meaningful job losses and slower growth. The S&P 500 is trading at valuations seen only twice in the past 40 years. Interest rates fell but inflation remained sticky, and corporate earnings growth slowed. Consumer spending showed signs of fatigue and credit stress quietly increased in certain markets. Large-cap technology and AI-related stocks drove much of the market advance. Labor market momentum is slowing, wage growth is set to moderate, and unemployment is likely to rise in 2026.
Read at 24/7 Wall St.
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