After the volatility, where is the stock market headed? After the volatility, where is the stock market headed? http://www.federatedhermes.com/us/static/images/fhi/fed-hermes-logo-amp.png http://www.federatedhermes.com/us/daf\images\insights\article\bull-stocks-small.jpg May 30 2025 June 4 2025

After the volatility, where is the stock market headed?

With peak tariff uncertainty behind us, we think stocks should grind higher.

Published June 4 2025
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00:14
We think the worst of the volatility and uncertainty is behind us. We think we have seen peak tariff uncertainty, and that makes us pretty constructive for the rest of this year and the next year. There is a lot of talk asking whether there is recession risk in the United States. We really do not see it. We've certainly seen a little bit of an economic slowdown but the labor markets are strong and as long as the labor markets hold in, that means the consumer holds in and the consumer is 70 percent of GDP growth in the United States. So we think, if anything, we might see a little bit of a re-acceleration in the economy in the second half of the year. We are also not overly concerned about inflation. There's some concern that tariffs will boost inflation, but we don't think we're going to see the worst of those tariffs implemented. And then there's emerging concerns about the Big, Beautiful Bill and whether it's going to blow a hole in the deficit and cause inflation. Again, we don't see that. We think most of that bill is paid for. It's slightly stimulative, but not so much so that it's going to create a big hole in the deficit and push inflation and interest rates massively higher. That said, there's still some risk out there. Companies have been frozen for the first half of this year because of the uncertainty, lower-end consumers have been under some pressure, so we've cut our earnings estimates something to more like single-digit earnings growth in 2025 but then going back to double digit earnings growth in 2026. Against that backdrop, we feel very comfortable about our year-end 2026 target for the S&P 500 of 7000. So a kind of grind higher, some more volatility still to come, but we expect that returns are going to be pretty good from here on out.
Tags Markets/Economy . Equity .
DISCLOSURES

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Gross Domestic Product (GDP) is a broad measure of the economy that measures the retail value of goods and services produced in a country.

S&P 500 Index: An unmanaged capitalization-weighted index of 500 stocks designated to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Indexes are unmanaged and investments cannot be made in an index.

Stocks are subject to risks and fluctuate in value.

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