Fed Chair Jerome Powell Warned Investors About the Stock Market -- President Trump's Tariffs Make the Warning More Dire

Core Insights - The Consumer Sentiment Index averaged 58.7 through the first 11 months of 2025, indicating it may be the worst year on record for consumer sentiment, surpassing the previous low of 59 in 2022 due to high inflation [1][7] - In November, the index recorded a measurement of 51, the second lowest in history, reflecting significant consumer concerns about the economy [2][7] - Wall Street analysts expect a 20% increase in the S&P 500 over the next year, but this optimism may be misplaced given the weak jobs market and rising inflation [3][10] Economic Indicators - The unemployment rate rose from 4.2% in April to 4.4% in September, marking the highest level in four years [3] - Job additions averaged 123,000 per month from January to April but dropped to 39,000 from May to September, the lowest five-month average since 2010, excluding the pandemic [4] - CPI inflation increased from 2.3% in April to 3% in September, with estimates suggesting it remained at 3% in October and November [4][8] Market Valuation - Federal Reserve Chairman Jerome Powell indicated that equity prices are highly valued, with the S&P 500 trading at 21.5 times forward earnings, above the 10-year average of 18.7 [6][11] - Despite a recent decline of over 4% from its record high, the S&P 500 still trades at a premium, raising concerns about potential market corrections [11] Consumer Behavior - Consumer spending, which constitutes two-thirds of GDP, is expected to decline due to widespread pessimism, potentially leading to lower forward earnings estimates from analysts [9] - Year-ahead inflation expectations rose to 4.5%, up from 3% in September, indicating growing consumer frustration with high prices and stagnant incomes [8] Investor Sentiment - Bullish sentiment among investors dropped from 45.9% to 32.6% in recent weeks, reflecting a decrease in optimism regarding stock market performance [13] - If the economic fallout from tariffs leads to downward revisions in earnings estimates, the current bull market may be at risk [14]