Worries about a U.S. recession are growing, and new research from Apollo shows that even if interest rates drop, the federal budget deficit could still get worse. Torsten Sløk, Apollo’s chief economist, explained that while lower rates might save the government about $500 billion a year in interest payments, a recession would cause more damage. When the economy slows, tax revenue usually falls, and government spending on programs like unemployment goes up, which would add about $1.3 trillion to the deficit. That means that the extra costs would more than cancel out the savings.
Meanwhile, President Donald Trump claimed this week that his tariffs are bringing in a record amount of revenue for the U.S. and are helping to lower prices on essentials like gas and groceries. Inflation did drop more than expected in March, with the consumer price index falling by 0.1% and annual inflation easing to 2.4%. A large part of that drop was due to lower energy prices, especially gasoline, which fell 6.3%. Still, many experts warn that high tariffs could make things more expensive in the long run by raising costs for businesses and slowing down the economy.
Even though Trump eased some tariffs, like those on electronics, he raised others, such as the 145% total duty on Chinese imports. Unsurprisingly, China responded with a 125% tariff on U.S. goods. On top of that, Trump’s administration just started looking into new tariffs on electronics and pharmaceuticals. Economists say that these moves could hurt American supply chains and drive up consumer prices. Indeed, Amazon CEO Andy Jassy added that many sellers may pass those added costs on to shoppers.
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, 87 Holds, and seven Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $670.59 per share implies 26.1% upside potential.
