Latest news with #GregDaco
Yahoo
29-06-2025
- Business
- Yahoo
‘Fog in the data': Soaring stock market nears second half of 2025 with lingering uncertainty
Stocks made a swift and historic comeback from the market's April bottom, with the S&P 500 (^GSPC) closing at a record high on Friday. Now, as the first half of 2025 draws to a close, overarching risks are all but removed. From tariff-driven inflation pressures to conflicting economic signals and murky data, what lies ahead is anything but straightforward. Read more: How to protect your money during turmoil, stock market volatility "We are going to see an inflation reacceleration that will be tariff-induced," EY chief economist Greg Daco told Yahoo Finance on Friday. "There's more pressure to come into the economy [and that will lead to] income erosion and a consumer spending slowdown. That is really the picture that we should expect in the second half of this year." The latest reading of the Federal Reserve's preferred inflation gauge reflected some of those concerns, with price increases accelerating in May as inflation remains above the Fed's 2% target amid underlying signs of slowing economic growth. "The broad picture is that we are going to be in an environment where we're going to see increased fog in the data at the same time as there is increased fog from policy uncertainty," Daco said, adding it's a "combo that is not ideal for anybody that is looking to plan for the next few years." That includes the Federal Reserve, as policymakers walk a delicate line when deliberating potential rate cuts. And while some Fed officials have reopened the door to a July cut, Daco believes the bar remains high. "I think we should not expect a July rate cut," he said. "The majority of the FOMC voting members are not on board." Instead, Daco sees September as the more likely pivot point, with economic momentum expected to cool further in the coming months. "We will have seen more demand erosion, we will have seen a labor market that unfortunately has slowed, and income growth as a result has slowed," the economist explained, noting that this slowdown could outweigh the risk of near-term inflation reaccelerating from tariffs. 'The Fed is going to have to decide to, on the side of caution, focus more on the growth slowdown because the inflation effect is likely to be short-lived.' Those economic concerns, however, have yet to weigh heavily on investors. Markets have powered higher, led by strength in tech and financials, as consumer sentiment rebounds and traders digest growing clarity around trade policy. 'The markets are starting to focus on some of the more positive growth aspects,' said Keith Lerner, co-chief investment officer at Truist, pointing to the eventual passage of President Trump's tax bill, deregulation efforts, and the anticipated arrival of rate cuts. "So I think all that means the market does move higher," he added. "But there will certainly be some gut checks along the way." Investors were hit with one of those gut checks late Friday, when President Trump said he was cutting off trade talks with Canada just hours after confirming the US had reached a deal with China. It served as a sharp reminder that with Trump, even the expected remains unpredictable. In a sign of that uncertainty, several high-profile companies, including General Motors (GM), American Airlines (AAL), Mattel (MAT), and many others, withdrew guidance this past earnings season, citing concerns around global trade. While that added to market uncertainty, it also lowered expectations, setting the stage for potential upside surprises in the second half of the year. "When that happens, we have a lower bar that we can absolutely exceed, which is why we usually do very well every earnings season," said Jessica Inskip, director of investor research at "But we can also focus on the knowns, like more IPO activity and the AI narrative coming back to life." Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at
Yahoo
29-06-2025
- Business
- Yahoo
‘Fog in the data': Soaring stock market nears second half of 2025 with lingering uncertainty
Stocks made a swift and historic comeback from the market's April bottom, with the S&P 500 (^GSPC) closing at a record high on Friday. Now, as the first half of 2025 draws to a close, overarching risks are all but removed. From tariff-driven inflation pressures to conflicting economic signals and murky data, what lies ahead is anything but straightforward. Read more: How to protect your money during turmoil, stock market volatility "We are going to see an inflation reacceleration that will be tariff-induced," EY chief economist Greg Daco told Yahoo Finance on Friday. "There's more pressure to come into the economy [and that will lead to] income erosion and a consumer spending slowdown. That is really the picture that we should expect in the second half of this year." The latest reading of the Federal Reserve's preferred inflation gauge reflected some of those concerns, with price increases accelerating in May as inflation remains above the Fed's 2% target amid underlying signs of slowing economic growth. "The broad picture is that we are going to be in an environment where we're going to see increased fog in the data at the same time as there is increased fog from policy uncertainty," Daco said, adding it's a "combo that is not ideal for anybody that is looking to plan for the next few years." That includes the Federal Reserve, as policymakers walk a delicate line when deliberating potential rate cuts. And while some Fed officials have reopened the door to a July cut, Daco believes the bar remains high. "I think we should not expect a July rate cut," he said. "The majority of the FOMC voting members are not on board." Instead, Daco sees September as the more likely pivot point, with economic momentum expected to cool further in the coming months. "We will have seen more demand erosion, we will have seen a labor market that unfortunately has slowed, and income growth as a result has slowed," the economist explained, noting that this slowdown could outweigh the risk of near-term inflation reaccelerating from tariffs. 'The Fed is going to have to decide to, on the side of caution, focus more on the growth slowdown because the inflation effect is likely to be short-lived.' Those economic concerns, however, have yet to weigh heavily on investors. Markets have powered higher, led by strength in tech and financials, as consumer sentiment rebounds and traders digest growing clarity around trade policy. 'The markets are starting to focus on some of the more positive growth aspects,' said Keith Lerner, co-chief investment officer at Truist, pointing to the eventual passage of President Trump's tax bill, deregulation efforts, and the anticipated arrival of rate cuts. "So I think all that means the market does move higher," he added. "But there will certainly be some gut checks along the way." Investors were hit with one of those gut checks late Friday, when President Trump said he was cutting off trade talks with Canada just hours after confirming the US had reached a deal with China. It served as a sharp reminder that with Trump, even the expected remains unpredictable. In a sign of that uncertainty, several high-profile companies, including General Motors (GM), American Airlines (AAL), Mattel (MAT), and many others, withdrew guidance this past earnings season, citing concerns around global trade. While that added to market uncertainty, it also lowered expectations, setting the stage for potential upside surprises in the second half of the year. "When that happens, we have a lower bar that we can absolutely exceed, which is why we usually do very well every earnings season," said Jessica Inskip, director of investor research at "But we can also focus on the knowns, like more IPO activity and the AI narrative coming back to life." Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at Inicia sesión para acceder a tu cartera de valores
Yahoo
26-06-2025
- Business
- Yahoo
U.S. economy shrank more than previously thought in early 2025
The U.S. economy shrank faster than previously thought during the first three months of 2025, with growth contracting for the first time in three years. The country's gross domestic product fell at an annual rate of 0.5% from January through March, the Commerce Department reported Thursday in its third and final GDP report for the period. The agency's initial first-quarter GDP report, issued in April, estimated a 0.3% decline, which was later revised to a 0.2% dip in its second print. First-quarter growth was weighed down by a surge of imports as U.S. companies and households rushed to buy foreign goods before the Trump administration's tariffs went into effect. Although a surge in imports can appear to lower economic growth because it shows a shift away from domestic consumption, that doesn't tell the whole story about the U.S. economy, experts say. A category within the GDP data called "real final sales to private domestic purchasers," which measures the economy's underlying strength, rose at a 1.9% annual rate from January through March. While that represents a solid number, it's down from the 2.9% pace in the fourth quarter of 2024 and from the Commerce Department's previous estimate of 2.5% January-March growth. The new data also shows that consumers sharply pared spending earlier this year, with growth at 0.5%, down from a robust 4% during the last three months of 2024. First-quarter consumer spending fell to its lowest level since the pandemic ended, with Americans particularly cutting back on recreation and dining, Greg Daco, EY-Parthenon chief economist, said in a research note. "What we're witnessing is an economy temporarily buffered from the tariff shock by smart logistics maneuvers, proactive pricing strategies and some foreign exporter concessions," Daco said. On Tuesday, Federal Reserve Chair Jerome Powell told a House committee that businesses' rush to build their inventories earlier this year ahead of tariffs taking effect has helped delay any inflationary impacts from the import duties. Because tariffs are paid by domestic importers, all or some of the costs are typically passed onto consumers. Stocking up on inventory early in the year has allowed companies to sell those goods without the added costs of tariffs, Powell noted. "The things that are being sold at retail now, they might have been put into inventory before the tariffs in February or March," the Fed chief said. "We think we should start to see this over the summer, in the June numbers and in the July numbers." Second-quarter rebound? The category of real final sales to private domestic purchasers includes consumer spending and private investment, but excludes volatile items like exports, inventories and government spending. Ryan Sweet of Oxford Economics called the decline in that figure "troubling,″ though he doesn't expect to make a significant change to his near-term economic forecast. Sweet noted that he'll be looking Friday's release of personal consumption expenditures, or PCE, because it will "show how the revisions impacted the trajectory of consumption headed into this quarter." The PCE, the Federal Reserve's preferred inflation measure, shows household spending on goods and services. Economists are forecasting that the first-quarter's influx in imports won't be repeated in the second quarter, which spans April through June, and shouldn't weigh on GDP during the period. Economic growth is forecast to bounce back to 3% in the second quarter, according to economists polled by financial data firm FactSet. The Commerce Department will release its first estimate of second-quarter GDP on July 30. Young Cuban girl asks Trump to lift travel ban stopping her from joining mom in U.S. Hegseth gets heated over reporting on Iran strikes initial assessments Supreme Court allows South Carolina to block Medicaid funds from Planned Parenthood
