Goldman Sachs predicts that consumer costs will rise by 70% this autumn. Their initial analysis shows that tariffs impact different economic players in various ways. Data from June 2025 reveals that foreign exporters have absorbed 14% of US tariffs, American companies have taken on 64%, while consumers feel 22% of the costs.

Impact Of Tariffs

Protected domestic companies have increased their prices. JP Morgan indicates that we are starting to see the effects of tariffs on the economy. Prices for goods are rising, and consumption is declining, signaling economic changes. US companies are shouldering the most tariff costs, absorbing 64% of the burden as of June 2025. With consumer prices projected to surge by another 70% into the autumn, corporate profit margins face serious threats. This suggests a negative outlook for market indices like the S&P 500 in the upcoming weeks. The combination of rising prices and slowing consumption points to increased market volatility. The CBOE Volatility Index (VIX) rose to 21 this past week, a significant increase from the low teens seen in the spring. Consider buying VIX call options or VIX futures to hedge against, or profit from, a potential spike in market fear.

Federal Reserve Position

The Federal Reserve finds itself in a tough spot, needing to combat inflation while trying to avoid a recession. July’s CPI data showed inflation stubbornly high at 4.9%, making a rate cut unlikely despite the slowdown in consumption. Traders might consider options on SOFR futures, betting on continued fluctuations in short-term rate expectations. Certain sectors, especially retail and consumer discretionary stocks, seem particularly at risk. Major retailers are vulnerable to both rising import costs and decreasing consumer demand. Buying put options on retail-focused ETFs, like the XRT, could be a wise move in this environment. Historically, economic uncertainty leads to a shift toward safe-haven assets. During the stagflation of the 1970s, gold benefited significantly from this shift. Gold futures surpassed the $2,600 per ounce mark in early August, and we anticipate this upward trend will continue. A slowing US economy may put pressure on the US Dollar, though high inflation could provide some support. The US Dollar Index (DXY) has been trading sideways in a tight range, reflecting market indecision. This situation suggests opportunities in currency options that could profit from a significant breakout in either direction for pairs like EUR/USD. Create your live VT Markets account and start trading now.

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