Wall Street is giving off whiplash vibes as investors try to square sticky inflation, flagging consumer strength, and hopes for a September Federal Reserve rate cut. Stocks broadly slipped Monday, with the Dow down 0.45%, the S&P 500 off 0.25%, and the Nasdaq dropping 0.3% (WSJ). Yet, as the S&P 500 hovers near record highs, a gnawing sense of disconnect is taking hold.
Are markets “whistling past the graveyard”? Many analysts warn that stocks have built in a "money illusion"—consumers' asset values feel inflated even as real wage income slows to about 1% annual growth and savings rates lag pre-pandemic levels (Fortune). Tech heavyweights—now over 34% of the S&P 500—keep running on AI optimism, but strategists like Stifel’s Barry Bannister are bracing for a potential 10–14% correction if economic fundamentals deteriorate late this year.
For now, bond yields are steady and traders have baked in an 87% chance of a Fed rate cut by September (CNBC), hoping easier money will counteract tariff drag. But with inflation proving sticky and labor data foggy, “hopium” may be the market’s most volatile asset class.
