Who’s picking up the tariff bill? In this month’s edition, we take a look at the resilience of US corporates and consumers with Deputy Chief Investment Strategist, Deanne Baker.
Key Messages for Investors
- US corporates have so far shouldered most of the costs associated with tariffs.
- While earnings have come down, the Q2 earnings season impressed, with results better than many feared.
- Companies have so far avoided the worst impact of tariffs, helped by three main factors: adoption of a range of mitigation strategies, Artificial Intelligence (AI) activity and a softer US Dollar (USD).
- It’s likely that the US consumer will start to pick up a larger share of tariff costs over the coming quarters, but they too, are starting on a solid footing.
- US consumers have been resilient to-date, and with real disposable incomes starting to rise and further rate cuts likely, they should be able to weather the impact so long as they remain employed.
- Policy cross currents continue to complicate the outlook and valuations remain stretched.
- Risks remain broadly balanced from here, with risks to both the upside and downside. Remain close to benchmark.