The S&P 500 ( ^GSPC 1.07% ) crashed after President Donald Trump announced severe tariffs in April. The index has since staged an incredible recovery, adding 16% year to date. But the Trump administration's trade policies have left the economy on shaky ground. Hiring has slowed sharply, and unemployment recently hit a four-year high.

Labor market weakness prompted the Federal Reserve to cut interest rates at the December meeting. But that headline overshadowed a more important development. Policymakers raised their economic growth forecast for 2026, such that gross domestic product (GDP) is now projected to increase 2.3% next year, up from the previously forecasted 1.8%.

Strong GDP growth often coincides with strong returns in the stock market, so the Federal Reserve's increase

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