Wall Street strategists are sounding alarms that the U.S. economy is drifting toward stagflation as the impact of trade tariffs start to show up, potentially restricting the ability of the Federal Reserve to slash interest rates.

While investors have so far largely shrugged off the warning signs, data is suggesting an approaching period of sticky inflation and sluggish economic growth, the analysts said.

Few signs of those jitters are showing up yet in assets other than the U.S. dollar. The S&P 500 has hit multiple records this year and an index of U.S. Treasuries is headed for its best performance since 2020. Meanwhile, the greenback is down 8 percent against a basket of peers.

Traders, who think inflation is under control, are piling into bets that the Fed will cut rates twice this ye

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