The U.S. stock market has been riding high, but cracks are forming. The S&P 500 recently surged over 25% from April’s lows, yet analysts aren’t convinced this rally can last. President Trump’s aggressive new tariffs—some as high as 35%—have added uncertainty to the outlook. RBC Capital raised its year-end target for the S&P 500 to 6,250, but called the second half of 2025 a likely “choppy ride.” With more tariff threats on Canada, the EU, and Mexico, investors are on edge.

Even bullish voices, like Ed Yardeni of Yardeni Research, warn that the stock market could shift from a V-shaped recovery to a flatline if tariff drama continues. Wall Street wants Trump to settle trade tensions fast. If not, market momentum may vanish.

Inflation Risks Grow as Tariffs Begin to Bite

Inflation is creeping up—and tariffs are partly to blame. June’s U.S. consumer price index (CPI) is due today, and it’s expected to rise 0.3% month-over-month and 2.7% annually. Economists are watching closely to see if Trump’s tariff hikes are finally filtering into the prices consumers pay. Early signs show a rebound in categories like used cars and travel, suggesting inflation pressures are building.

Some experts believe this won’t trigger panic at the Federal Reserve—at least not yet. But if today’s CPI report comes in hotter than expected, interest rate hikes could return to the discussion. Goldman Sachs and Bank of America both project more inflation bumps ahead, mainly from imported goods. For now, companies are absorbing some costs. That may not last as tariff stockpiles dwindle and business margins thin.

China and Japan: Rising Growth and Rising Yields, But Storm Clouds Loom

In Asia, China’s economy showed stronger-than-expected growth in the second quarter, posting 5.2% GDP growth. Industrial output was solid, but retail sales and real estate remain weak. China’s economic engine is sputtering in places, and deflation fears remain despite the good GDP print. The country is still working through the fallout of Trump’s earlier 145% tariff escalation, though a tentative truce is in place until August 12.

Meanwhile, Japan’s bond yields have surged to multi-decade highs as political uncertainty clouds the outlook. The country’s 10-year yield hit its highest level since 2008, raising alarm ahead of upcoming elections. Debates over tax cuts and rising fiscal spending are fueling fears of more debt. With inflation in Tokyo still above 3%, the Bank of Japan may face pressure to tighten policy sooner than planned. All of this adds strain to global markets already uneasy about U.S. trade moves.

Stock Market on Edge as Earnings and Inflation Data Loom

With U.S. stock indexes at record highs, traders are bracing for the next wave of earnings and inflation data. Big banks like JPMorgan, Wells Fargo, and Bank of America are kicking off earnings season. Wall Street hopes strong results can offset tariff worries and keep the S&P 500 afloat. But expectations are low—only 4.3% earnings growth is projected for the quarter.

If inflation runs hotter than expected or earnings disappoint, the stock market could wobble. Even small surprises in consumer prices could rattle nerves. The impact of Trump’s tariffs may finally be showing up in company profits and inflation reports. Investors are watching closely, hoping for clarity—but preparing for volatility.

Global Stock Market Feels the Heat as Trump Targets Europe Again

European markets are also feeling the chill from Trump’s tariff threats. The 30% duty aimed at the EU, scheduled to start August 1, has Europe scrambling for a trade deal. While indexes like Germany’s DAX and London’s FTSE opened slightly higher, nerves remain frayed. The pan-European Stoxx 600 finished nearly flat on Monday after dipping early.

Trump’s tariff moves are sparking retaliation fears, which could weigh on the global stock market. With U.S.-EU tensions heating up and China talks hanging by a thread, a broader trade war is not off the table. Markets worldwide—from Europe to Asia—are now tied to the pulse of Trump’s next tweet or trade letter. In this high-stakes game, the stock market’s future hangs on uncertain diplomacy and rising inflation.