President Donald Trump’s sweeping set of new tariffs has created a higher risk of a U.S. recession. That’s according to Oxford Economics’ Ryan Sweet, who warned that the economy has become “dangerously vulnerable” now that the average U.S. tariff rate is expected to rise to levels not seen in 100 years. Indeed, he listed three main reasons:
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- Higher inflation that cuts into people’s buying power
- Tighter financial conditions that could hurt markets
- Trade policy that slows business investment and hiring
As a result, Oxford lowered its economic growth forecast for 2025 from 2% to 1.4% and raised its inflation outlook from 3.1% to 3.9%. This mix of slower growth and higher inflation points to stagflation, which is a situation where the economy struggles while prices still rise and unemployment ticks up. Although the Federal Reserve still believes that inflation will be temporary, many economists are skeptical that the Fed is fully accounting for the impact of tariffs.
Other analysts shared these concerns. EY’s Greg Daco estimated that the tariffs could cost the average U.S. household $690 a year, with low-income families losing more than $1,000. As a result, Morningstar called the tariffs a “self-inflicted economic catastrophe,” and JPMorgan said falling income could push consumer spending into negative territory. In addition, Bank of America warned that stagflation is now much more likely, which would make it harder for the Fed to cut interest rates this year.
Is SPY a Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY) based on 410 Buys, 86 Holds, and eight Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $683.68 per share implies 26% upside potential.
