Stagflation Shock: Economist Warns of Trade War's Dire Impact on US Economy

Key Points:

* Economist Torsten Sløk predicts a "stagflationary shock" in the US economy if a full-scale trade war ensues.
* Stagflation is characterized by slow growth and high inflation.
* Markets have remained resilient despite tariff announcements, but investors are urged to take the risk seriously.
* The potential impact of tariffs could reduce S&P 500 earnings per share by 1-2% for every 5-percentage-point increase in the tariff rate.
* Uncertainty caused by tariffs could further impact US stocks.

In-Depth Analysis:

Apollo Global Management Chief Economist Torsten Sløk warns that a full-scale US trade war with Europe, China, Canada, and Mexico could deliver a severe blow to the US economy, resulting in a "stagflationary shock." Stagflation is defined as a period of slow economic growth accompanied by high inflation.

Despite recent tariff announcements, markets have shown remarkable resilience. However, Sløk expresses surprise at this resilience and attributes it to the fact that full-scale tariffs have yet to be implemented.

Goldman Sachs' David Kostin cautions investors that tariffs could potentially damage US stocks by reducing earnings and increasing uncertainty.

Market Insights:

* Major market indices (S&P 500, Nasdaq Composite, and Dow Jones Industrial Average) remain near record highs despite tariff volatility.
* "Magnificent Seven" component Meta (META) has experienced a stellar 15 consecutive trading sessions with gains.
* Experts advise investors to take tariff risks seriously and consider their potential impact on earnings and stock market valuations.

Executive Editor's Perspective:

Yahoo Finance Executive Editor Brian Sozzi emphasizes the need for investors to understand the potential magnitude and impact of tariffs. He suggests monitoring developments over the next 30 days to determine if tariffs become law or are implemented.

Additional Resources:

* Opening Bid Podcast: https://podcasts.apple.com/us/podcast/opening-bid/id1315987736
* Yahoo Finance Stock Market News: https://finance.yahoo.com/
* Yahoo Finance Business News: https://finance.yahoo.com/news