United States: For the moment, Wall Street appears content with President Donald Trump’s increasingly forceful reliance on executive authority in the arena of tariffs.

On Tuesday, America’s principal stock benchmarks surged to uncharted peaks, buoyed by an inflation report that proved less alarming than anticipated. While the finer points of the data presented a somewhat uneven portrait of the broader economy, the figures suggested that initial fears of immediate, sweeping price surges triggered by Trump’s tariff measures may be ebbing.

“Prices for many goods will inevitably creep upward in the long run due to tariffs,” remarked James Knightley, ING’s chief international economist, in a note to clients. “However, sustained inflationary strain is unlikely. This is a markedly different environment from 2021–22, when inflation rocketed to 9%.”

Some tariff-exposed goods saw a modest uptick in inflation during July, yet the trend softened for items such as household appliances and clothing. Instead, the most notable price escalations emerged within service-oriented sectors — airfare and vehicle insurance among them, according to NBC News.

“The upward pressure was isolated to a limited set of categories rather than being widespread,” analysts at Citi observed.

Tariffs, fundamentally, are taxes layered upon imported goods. Goldman Sachs estimates that US consumers have shouldered roughly 22% of the resultant price increases — a proportion expected to climb as the levies become more deeply embedded in global supply chains. Trump, however, dismissed Goldman’s calculations on Tuesday. Short-term buffers — such as companies stockpiling goods before tariff deadlines, seasonal discounts, and repeated deadline reprieves granted by the administration — have tempered the immediate blow to household budgets.

Yet in public opinion surveys, tariffs continue to earn a frosty reception. A mid-July Fox News poll revealed Americans disapproved of Trump’s tariff strategy by a margin of 26 points, essentially mirroring sentiments from April, when Trump unveiled unprecedented levy levels during his Rose Garden “Liberation Day” address.

The equity markets, in contrast, seem largely unfazed. Following Tuesday’s inflation release, traders raised their expectations of a Federal Reserve interest rate cut in September. Lower rates would ease borrowing costs for corporations, a prospect that generally lifts stock valuations, as reported by NBC News.

This market buoyancy stands in sharp contrast to the tumultuous sell-off that followed April’s “Liberation Day” speech, which rattled investors to such an extent that Trump instituted a 90-day suspension to reassess what he had championed as a pillar of his second-term economic framework.

Today, while Trump’s tariff emphasis remains intact, his once maximalist approach has been moderated. Paired with signs of a cooling labor market, investors increasingly wager that the Fed will lean toward supporting economic activity through rate reductions.

However, the stock market’s rise does not mirror the entirety of the US economy. Much of the S&P 500 and Nasdaq’s climb is now tethered to the outsized performance of a select cadre of technology titans — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — collectively dubbed the “Magnificent Seven.” As of last month, these firms represented a staggering one-third of the S&P 500’s weighted value, according to LSEG Datastream data cited by Reuters.

Morgan Stanley’s July review revealed that just 9% of S&P 500 constituents were trading at 52-week highs. Such concentration means the indexes’ movements are heavily dependent on the fortunes of a few behemoths. Underperformance by even one can drag the entire market downward.

“When market leadership rests in the hands of a mere handful of stocks, any period of disappointment among them can trigger disproportionate damage to investor portfolios,” Michael Reynolds, vice president of investment strategy at Glenmede, told Reuters.

Small enterprises remain particularly exposed to tariff fallout, lacking the pricing leverage enjoyed by larger players. The National Federation of Independent Businesses noted a shrinking proportion of members reporting profitability.

“Costs are climbing across the board. I believe conditions will eventually improve, but perhaps not for another six to twelve months,” one Michigan metal fabrication firm told the NFIB in July. “The challenge is surviving until then,” as reported by NBC News.

The US economy, cautions Kevin Gordon, senior investment strategist at Charles Schwab, is not yet entirely clear of danger. On Thursday, the Bureau of Labor Statistics will release producer price index data — a gauge of wholesale inflation often scrutinized closely by the Fed. Should it reveal more pronounced inflationary pressure than Tuesday’s report implied, the current market highs could be swiftly erased.

Absent such a shock, Gordon suggested the backdrop remains less perilous than many feared, potentially setting the stage for additional gains.

“Weaker growth isn’t alarming right now,” he said. “Yes, there’s been some slowing, but it doesn’t point to an imminent recession.”