• Recent policy moves on tariffs, Fed independence, and fiscal stimulus are seen as manageable for markets.
  • Equity indices have shown resilience, with the S&P 500 rallying to new all-time highs after initial volatility.
  • Analysts project economic reacceleration into 2026, with near-term risks offset by robust corporate earnings and new stimulus.

Recent policy shifts from the Trump administration—including volatile tariff announcements, concerns over Federal Reserve independence, and the passage of a major stimulus bill—are unlikely to halt the ongoing U.S. equity rally, according to analysis from Wolfe Research. Markets have largely absorbed the initial shocks, with the S&P 500 posting a robust 10.9% gain in the second quarter and reaching new all-time highs by June 2025.

The administration's decision to pause a new round of reciprocal tariffs for 90 days, after initial announcements triggered short-lived declines, is emblematic of a pattern investors have come to expect. "Markets have adapted to trade volatility shaped by the 'TACO' dynamic—Trump Always Chickens Out," one analyst noted, suggesting that the threat of tariffs often outweighs their final implementation. While effective tariff rates have increased markedly and could theoretically reach 30% if fully reinstated, major deal frameworks pending with the UK, China, and Vietnam have provided a buffer against sustained sell-offs.

Concerns about the independence of the Federal Reserve have also persisted, particularly surrounding the potential removal of key governors like Lisa Cook. While such a move would raise institutional uncertainty, analysts at Wolfe suggest it has had limited direct market impact so far and is not a near-term catalyst for a downturn.

Perhaps the most significant bullish factor is the fiscal stimulus from the "One Big Beautiful Bill" passed by Congress in July. The package provides pro-growth support through tax incentives for capital expenditure and R&D, alongside stepped-up government spending that is expected to bolster corporate investment. This, combined with solid corporate earnings and continued consumer spending, is fueling projections of economic reacceleration into 2026.

Bond and currency markets have shown more stress than equities, with yields initially dropping before rising amid a resurgence of 'bond vigilantism' and the U.S. dollar declining sharply. However, the equity rally appears insulated for now. Wolfe Research concludes that while longer-term risks from unresolved trade issues and inflationary pressures remain, near-term policy risks look tractable and markets are expected to remain supported through year-end.