MW The stock market isn't waiting around for Aug. 1 to decide if tariffs will hurt consumers

By Isabel Wang

Price increases could still take a toll if President Trump's threatened additional tariffs become a reality in two weeks: Oxford Economics

Retail sales for June point to something the stock market already feels pretty confident about: U.S. consumers will keep spending, even if bigger tariffs hit in a few weeks.

U.S. stocks were rising Thursday - with the S&P 500 SPX and the Nasdaq Composite COMP each eying fresh records - after a June retail sales report showed Americans were keeping their wallets open, even as President Donald Trump looks to pressure U.S. trade partners into quickly striking trade agreements through the threat of higher tariffs come Aug. 1.

"Consumers are flexing their spending muscle again," said Gina Bolvin, president of Bolvin Wealth Management Group, in emailed comments. After May's slump, June's uptick in retail sales suggests "the American shopper is alive and well - and that matters for markets."

See: Retail sales snap back after trade wars die down. Shoppers keep the economy growing.

Retail sales increased 0.6% in June from the previous month, according to a Thursday report from the Census Bureau. Economists polled by the Wall Street Journal had expected a 0.2% increase following a 0.9% decline in May.

The fresh data - along with consumer and wholesale inflation data earlier this week - sooth concerns that President Trump's tariff fight will trigger an inflation resurgence and dent consumer spending.

"The death of the consumer has been greatly exaggerated," said Chris Zaccarelli, chief investment officer at Northlight Asset Management.

"There has been a lot of talk about tariffs and the stock market [getting] back to all-time highs, but there has been less talk about the economy at full employment and a consumer who continues to spend," he wrote in emailed comments Thursday.

The big 'TACO' bet?

Major U.S. stock indexes have been edging deeper into record territory in July, following a surge for all three major indexes from the tariff-induced lows of April.

Their rise has been attributed in part to a dip-buying mentality based on a view that though Trump threatens high tariffs, ultimately he will back down.

Read: Did Trump just 'TACO' on China? Nvidia's stock and China ADRs are flashing a signal.

The Nasdaq Composite was on pace for its fourth consecutive record close on Thursday. If sustained, the tech-heavy index would score its longest streak of all-time closing highs since Nov. 11, according to Dow Jones Market Data. The S&P 500 also was heading for a fresh record.

Of note, the S&P 500's consumer-discretionary sector XX:SP500.25, though down 0.5% Thursday, is 20.9% higher over the past three months, albeit still down 2.9% on the year, according to FactSet.

That suggests that investors not only have been counting on Big Tech stocks to ride out the tariff storm, but that they also are betting on consumers to keep powering through, even if much higher tariffs hit in early August.

"Although stock valuations are high, as long as the economy continues to expand and unemployment remains low, then people will continue to spend and the flywheel can keep generating higher profits, which is the engine for higher stock prices," Zaccarelli said.

To be sure, a closer look at the stronger-than-expected June retail data shows tariff-related price increases have begun to weigh on some sectors.

Michael Pearce, deputy chief U.S. economist at Oxford Economics, said his view is that inflation-adjusted consumer spending remained unchanged in June.

"Spending rose across most categories of retailers, but two notable exceptions were furniture and electronics stores, both of which are on the front lines of tariff-related price increases," Pearce said.

Pearce and his team expect there is "more pain to come," as prices will rise "much further over the coming months" before conditions likely begin to improve heading into 2026.

"Those price increases would be exacerbated if threatened additional tariffs on Aug. 1 become a reality. Higher prices will worsen a slowdown in real disposable incomes growth, hitting spending in the near term," he said.

The Dow Jones Industrial Average DJIA was up 0.3% to around 44,342, not yet surpassing its 45,014.04 record close from December, according to FactSet data.

-Isabel Wang

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July 17, 2025 13:16 ET (17:16 GMT)

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