Heightened market volatility tied to Trump's tariffs raises fears of economic risks and inflation

The stock market has seen heightened volatility in the first half of 2025, with concerns over President Trump’s tariff policies impacting economic growth and inflation. Corporate earnings quality is crucial for driving market highs, but enduring volatility is essential for long-term returns.

President Trump’s 90-day reciprocal tariff pause is set to end on July 9, raising fears about worsening trade relations and potential inflation spikes. Companies exposed to tariffs during Trump’s first term saw declines in sales, profits, employment, and productivity, highlighting the broader risks to the economy.

The stock market’s record highs may be built on shaky ground, as valuations have reached historic levels and corporate earnings quality is questionable. Companies like Apple and Palantir have used buybacks and interest income to boost profits, masking underlying issues. Tesla’s reliance on tax credits and interest income raises concerns about sustainability.

Investors are urged to consider the quality of earnings and valuations before investing in companies like Apple. The Motley Fool’s Stock Advisor team has identified 10 top stocks for potential high returns, emphasizing the importance of choosing wisely in a market with elevated risks.

Overall, the stock market’s rally may be at risk due to inflated valuations and poor earnings quality in influential companies. Investors should exercise caution and consider the underlying factors driving market highs before making investment decisions.

Read more at Nasdaq: Think President Donald Trump’s Tariffs Are Wall Street’s Biggest Concern? Then You’re Completely Overlooking This Colossal Problem.