Investing Charts to Watch Right Now

The S&P 500 experienced only a modest decline of about 1% earlier this month after President Donald Trump announced he would reimpose some tariffs that had previously been postponed in April. Still, optimism in the markets remains strong. On Wednesday, Nvidia Corp. made headlines as its market capitalization soared past the $4 trillion mark for the first time, a major milestone that fueled bullish momentum.

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Despite this, some experts are growing cautious. Daniel von Ahlen, a senior macroeconomic strategist at GlobalData TS Lombard, believes the sharp recovery U.S. stocks have staged since their April lows may be running out of room.

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He argues that a combination of factors—including a cooling economy and the Federal Reserve’s reluctance to ease policy further—could limit additional upside for equities in the second half of 2025, particularly with Trump’s tough stance on sector-specific tariffs.

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In a note shared with MarketWatch, von Ahlen presented several charts illustrating disconnects between economic data, market sentiment, and asset prices. These disparities, he warned, could spell trouble for investors if conditions shift unexpectedly.

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Despite the S&P 500’s rapid recovery following the March and April declines, investor sentiment remains muted. Surveys from organizations like Investors Intelligence and the American Association of Individual Investors show that investors, on average, aren’t overly bullish. While this lack of enthusiasm may seem concerning, von Ahlen suggests that it could actually work in favor of equities.

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He explained that with sentiment still in neutral territory, stocks could rise further simply because many investors are still positioned cautiously. “Unless there’s another major negative shock or a significant economic downgrade, the path of least resistance for U.S. equities may still be higher,” von Ahlen noted.

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Skepticism about the strength of the rally is supported by recent economic data. Real consumer spending—a crucial component that makes up roughly 70% of the U.S. economy—has lost momentum since late 2024.

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Although some economists have blamed this on lingering effects from the reintroduction of tariffs in April, von Ahlen warns that if this slowdown continues into the back half of the year, it could weigh on corporate earnings and dampen market enthusiasm. Persistent weakness in household spending may prove to be a drag on economic growth overall.

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So far in 2025, investors have mostly brushed aside signs of economic softness and placed bets on a strong rebound. One clear indicator of this optimism is the outperformance of cyclical stocks—those tied closely to the health of the economy—over defensive stocks, which tend to be more stable during downturns.

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This trend recently returned to its early-year highs, suggesting that investors are still pricing in solid growth for the rest of the year. But von Ahlen cautions that if this expected strength in the economy doesn’t materialize, the stock market could be in for a sharp correction.

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The market is currently pricing in two interest rate cuts by the Federal Reserve before the end of 2025. However, TS Lombard thinks that may be overly hopeful. According to von Ahlen, the inflationary consequences of Trump’s tariffs haven’t been fully absorbed yet. Once these effects ripple through the economy, they could keep inflation higher than expected.

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In that scenario, the Fed may feel compelled to act more cautiously and deliver only one rate cut this year. Investors expecting more aggressive easing could be let down, especially if inflation reaccelerates.

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In the bond market, yields on longer-term Treasurys like the 10-year and 30-year have risen, and von Ahlen believes there’s not much space left for them to decline.

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While a weakening labor market is already factored into economic projections—with slower job growth and a potential uptick in unemployment on the horizon—this hasn’t created room for much lower yields. Futures tied to the Secured Overnight Financing Rate (SOFR) suggest the Fed’s key rate could bottom out at just over 3% in late 2026, leaving little wiggle room for significant yield compression from here.

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As of Wednesday afternoon, U.S. stocks were still trading higher, but off their intraday peaks. The S&P 500 was up 15.6 points, or 0.3%, at 6,241. The Nasdaq Composite gained 101 points, or 0.5%, reaching 20,519. Meanwhile, the Dow Jones Industrial Average rose by 66 points, or 0.2%, to 44,308.

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While markets continue to advance, the underlying data and macroeconomic environment may not fully support current valuations. Von Ahlen’s analysis points to a market that could face headwinds in the coming months if economic growth doesn’t meet expectations or if the Fed disappoints investors hoping for rate relief.

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