Stocks climbed modestly higher on Thursday as two days of low inflation readings and the conclusion of a round of talks between the U.S. and China cheered investors. Boeing plunged after the Air India crash. A 30-year Treasuries auction showed investors still want long-term U.S. debt, deficit fears notwithstanding.
Investors cheered two days of positive inflation data that sent stocks modestly higher Thursday. The S&P 500 gained 0.38%. The Dow and the Nasdaq each rose 0.24%. Boeing, however, ended the day down nearly 5% after its Dreamliner 787-8 jet was involved in a tragic plane crash that claimed the lives of more than 200 people.
The U.S. and China concluded trade talks in London earlier this week that are poised to restore trade in critical minerals to the U.S. These rare earths are used in advanced manufacturing of items like electronics and batteries.
Recent government data was also encouraging, showing that tariff-induced inflation economists have warned about for months has yet to materialize. On Thursday, the producer price index showed wholesale inflation coming in cooler than expected, a day after the consumer price index was similarly positive on consumer prices, showing inflation at a 2.4% annual rate.
“For the second day in a row, inflation data came in lower than expected, and this gives the Fed room to sit on their hands,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management. “As long as inflation isn’t increasing—or even better, is decreasing—the Fed can be patient and wait for more information on how the new tariffs and trade negotiations are going to impact the price stability part of their dual mandate later this year.”
Bond yields fell. A closely watched auction of 30-year Treasuries Thursday was awarded at 4.844%, Bloomberg reported, quelling fears that investors were starting to boycott U.S. bonds.
The dollar continued to lose ground against a basket of currencies. So far this year, the greenback has lost about 9% of its value, and is trading at its lowest level in more than three years.
GameStop fell 23% after announcing it planned to raise $1.75 billion from investors by issuing convertible bonds. Boeing lost 4.8% after the fatal crash of an Air India Dreamliner in Ahmedabad, India, that killed 241 people.
The impact of tariffs will depend on who bears their cost, says Jeff Klingelhofer, managing director at Aristotle Pacific—but it doesn’t have to be the consumer, who is “tapped out.” Corporations can better handle an import tax hit because margins “have never been higher,” he says.
With U.S.-China talks ending in essentially a tariff stasis, investors are once again looking at the economy to figure out just how much of a shock the tariffs are going to be.
“The system is incredibly, incredibly fragile,” Jeff Klingelhofer, managing director and portfolio manager at Aristotle Pacific, told Fortune. However, the amount of shock tariffs ultimately deliver will depend on who bears the cost, he said.
Typically, that’s the end user. Importers and economists have for months been saying that the consumer usually pays the cost of import taxes.
“Most suppliers are passing through tariffs at full value to us,” a chemical products company told the Institute of Supply Management in a survey last month. “[T]axes always get passed through to the customer.” Studies of the 2018-2019 tariffs, which were much smaller, found nearly 100% of the added costs were passed on to the consumer. The Yale Budget Lab estimates that tariffs will cost the typical household $2,836 over the year.
Except, Klingelhofer said, this time could really be different.
“It doesn’t have to be the U.S. consumer” that pays tariffs. “You’re likely to see companies ultimately bear more of the pain of tariffs than consumers.”
Indeed, after absorbing four years’ worth of price hikes and shrinkflation on everything from household staples to housing, consumers may not be able to take much more pain. A record 77% are holding some debt, according to the Federal Reserve.
“The state of consumers is tapped out,” Klingelhofer said. However, “Corporate balance sheets are incredibly strong — margins have essentially never been higher in the history of humankind.”
Indeed, corporate profits as a portion of national income, a figure that never exceeded the single-digits until about two decades ago, surged to a record 13.6% in 2021. At they start of this year, they were just slightly lower, at 12.8%.
Companies have an additional incentive to absorb the cost of at least some of the tariffs, he said—the president, whom CEOs have been loath to cross, is watching. Trump’s spat with Walmart in May, directing the retailer to “eat” the cost of tariffs, is a prime example of the type of public policy via social media Klingelhofer said will be much more common if tariffs start to get passed on.
While the exact level of tariffs that companies, consumers and everyone else will pay is still up in the air, Klingelhofer says the direction is clear: “iIt’s going up notably.”
“I find it very hard to believe we exit this presidency with tariffs anywhere below the low teens, versus 1.7% of GDP,” their average level at the beginning of 2025, he said.
Kroger, whose CEO Rodney McMullen is pictured here in 2024, was one of many large companies accused of running up margins during the post-pandemic inflation surge.
After running interest rates near zero for a decade and a half, the Federal Reserve has turned cautious and is unlikely to cut anytime soon, according to Jeff Klingelhofer, a managing director and portfolio manager for Aristotle Pacific Capital. That’s because the central bank is concerned about social stability and inequality following its brush with record-high inflation—and low rates make inequality worse.
Most everyone knows about the Federal Reserve’s dual mandate. Set by Congress, the charge for the U.S. central bank is twofold: Create the conditions for stable prices (i.e., low inflation) and maximum employment. (The third mandate—to moderate long-term interest rates—flows naturally out of keeping inflation steady.)
Increasingly, though, the third mandate is changing, according to Jeff Klingelhofer, a managing director and portfolio manager for Aristotle Pacific Capital, an investment advisory. And that new task is social cohesion.
It’s a tough call for an entity that has seemed somewhat battered in recent years, bruised by its failure to catch COVID-era inflation in time and, increasingly, in a fight with the president of the United States, who is pressing on the Fed’s nominally independent head to lower interest rates.
“It’s out with the old—financial stability—and in with the new: social stability,” Klingelhofer told Fortune.
Klingelhofer notes that, before the 2007-2009 Global Financial Crisis, the Fed used to be very proactive in raising interest rates, hiking them well before any sign of inflation. Post-crisis, when unemployment was stubbornly slow to fall, critics accused the Fed of hiking rates too quickly and stymieing the recovery. (The Fed’s first rate cut came in late 2015, with unemployment at 5% and the Fed’s preferred measure of inflation at just 1%.) Inflation didn’t come close to hitting the Fed’s 2% target for seven years after the hike. Years later, two Fed governors admitted they got the balance wrong and should have kept rates lower for longer.
In 2020, that shifted. The Fed, by keeping rates low, “learned the biggest wage gains went to the lowest earners,” Klingelhofer said. “Coming out of COVID, the third mandate was social stability, compression of the wage gap.”
But the central bank also got burned with its prediction inflation would be “transitory.” That miss, coupled with the fastest and steepest rate-hiking cycle in modern history, has made the central bank loath to move too quickly on cutting rates this time.
This shift is evident in the tenor of Chair Jerome Powell’s speeches, starting at Jackson Hole, Wyo., in 2022.
“Without price stability, the economy does not work for anyone,” Powell said in 2022, adding the Fed was “taking forceful and rapid steps to moderate demand… and to keep inflation expectations anchored.”
“We will keep at it until we are confident the job is done,” he said.
That experience has pushed the Fed from proactive to reactive, Klingelhofer said. “They’ll need to see inflation below 2%, and think it’ll stay there.”
If a recession hits, “I don’t think the Fed will step in as they have in the past,” he added. “Maybe if it’s a deep recession, with high unemployment, and inflation falls below 2% dramatically—maybe.”
Low rates inflate assets
Historically low interest rates had another effect—they redistributed wealth upward by encouraging asset bubbles. In this way, as a recent body of economic research has shown, low rates have contributed to skyrocketing wealth inequality.
Low interest rates tend to juice stock-market appreciation, benefiting the 10% of the population that owns more than 90% of stock, and encourage investors to create novel assets as they chase bigger returns. These benefits accrue most to those who have the biggest financial assets—i.e., the wealthiest—while doing little for the poor.
And while low rates encourage higher employment, “the 1% of Americans who own 40% of all the assets just get tremendous gains before that first job is created for the middle class,” said Christopher Leonard, who criticized the Fed’s ultra-low-rate policies in The Lords of Easy Money, a 2022 book describing this dynamic. In this way, he said, the Fed exacerbates the gap between the ultra-rich and the rest of us, which he called “the defining economic dysfunction of our time.”
It’s another argument against cutting rates, in addition to the risk of reigniting inflation—whose burdens, as Powell repeatedly notes, “falls heaviest on those who are least able to bear them.”
“The alchemy of low interest rates is over,” Klingelhofer says. He isn’t convinced the Fed has that much influence on rates like the 10-year Treasury, which closely influences mortgage rates. These bonds trade in international markets where investors buy or sell them based on how they perceive the risks of U.S. debt.
“Where should 10-year Treasuries be? With inflation at 3%, and the government running 6-7% deficits, 4.5% feels roughly correct,” he said.
In fact, some economists saythe Fed’s cutting rates would be perceived as a recession indicator—and would have the opposite effect, sending bond yields and interest rates soaring.
As Redfin economics research head Chen Zhao told Fortune previously, “the Fed only controls that one Fed funds rate. Everything else is determined by markets.”
Turmoil on the streets didn’t faze the stock markets Monday, which continued to rise on hopes of U.S.-China trade progress, coming within striking distance of all-time highs set earlier this year.
Stocks continued their steady climb higher on Monday as the U.S. and China restarted trade talks and the White House clashed with California over sending military officers to quell civilian protests.
The S&P 500 gained 0.17%, moving within 2% of its all-time high just two months after losing 20% in April following President Donald Trump’s announcement of reciprocal tariffs. The Dow rose 0.07% and the Nasdaq gained 0.36%.
“There have been plenty of catalysts supporting the broader market’s recovery from the correction lows set last month,” Adam Turnquist, chief tactical strategist at LPL Financial, said in a note. “First quarter earnings season came in much better than feared, and most companies unexpectedly did not pull forward guidance. President Trump’s announcement of a 90-day pause on most reciprocal tariffs eased fears of an escalating trade war, while continued progress in trade negotiations further supported the risk-on rally. Steady retail buying and a slow return of institutional demand also supported the rebound.”
Tesla closed 4.3% higher after suffering its largest-ever market wipeout last week. CEO Elon Musk had fought with Trump over the president’s tax-cutting bill that is projected to add trillions to the national debt.
Apple lost 1.1%. The iPhone maker, which today held its annual developer conference, WWDC, has lagged in its artificial-intelligence efforts. Executives at the conference told attendees that a promised smarter version of its Siri virtual assistant wouldn’t be available until later this year.
Warner Bros. Discovery lost 3.2%, giving up a pop after the entertainment giant announced plans to split into two companies, separating its traditional TV business from its streaming unit.
“The diverging fortunes of streaming and traditional pay TV have been unmistakable for years, so it was only a matter of time before the dominoes started falling,” Paul Verna, vice president of content at eMarketer, toldYahoo Finance.
Negotiators from the U.S. and China were meeting in London on Monday to quash a simmering trade dispute. The two sides had struck a preliminary agreement in Geneva last month, only for China to strengthen restrictions on exports of critical minerals, including rare earths which are essential for technology, from cars to electronics.
On the West Coast, California was on its third day of protests after high-profile clashes between demonstrators and Immigration and Customs Enforcement (ICE) agents prompted President Donald Trump to send in the National Guard, against the wishes of Governor Gavin Newsom.
Yields on the 10-year and 30-year Treasuries fell.
At a financial conference, billionaire Bill Ackman shared the life advice that he says got him through a tumultuous time in his life. Applying the principle of compounding interest to his personal life, he said he tried not to look back, because that will depress you, but instead tried to improve a little bit every day.
Billionaire hedge fund manager Bill Ackman is known for his activist approach to investments—and, lately, topolitics.
His personal life has been just as dramatic. In the mid-2010s, Ackman went through an expensive divorce, saw his firm Pershing Square Capital Management lose billions of dollars, and nearly lost control of the company—all within the span of a few years.
Ackman shared the story on stage at the Forbes Iconoclast Summit in New York on Thursday.
“I was going through a divorce, which is great financial pressure. The fund was down 30-something percent,” he told Forbes Editor-in-Chief Steve Forbes.
“And then the industry, if you will, sort of ganged up on us,” he said, shorting stocks that Pershing Square owned and going long stocks the fund was shorting, most notably Herbalife.
It was a particular mindset that helped him make it through those years, Ackman recalled. Applying the principle of compounding interest to his personal life, he said, “my method was just trying to make a little progress every day.”
He quipped, “If you make 0.1% progress every day, it doesn’t sound like a lot—but annualized!”
So that’s what Ackman reminded himself every day, he told Forbes. “I’m going to make progress. I’m not going to look back to where I was. If I look there, I’m going to get discouraged. I’m just going to focus on the next step, and then the next step, and the next step,” he said.
“You don’t notice any meaningful change for the first few weeks,” he added. “About 90 days in, you’re like, ‘Okay, I’m here … and I’m just going to keep compounding.’”
The curve of progress doesn’t look like much initially, Ackman said, but soon—thanks to compounding—it takes off.
While Ackman’s near-professional-death experience was particularly stark, he believes his approach to progress can benefit anyone.
“All of us are going to have a moment like this, unfortunately… It could be a health issue. It could be you’re fired from your job, your startup fails,” he said. “And it’s even harder when you’ve fallen from a high place to a low place.”
After several years in a low place, Ackman is today back on top. His net worth nearly doubled last year to an estimated $8 billion after a new valuation round for Pershing Square. And while his divorce from his first wife reportedly cost a nine-figure amount, Ackman is now happily remarried to designer Neri Oxman.
Login
