Sentiment Drops as Tariff Concerns Weigh on Futures

U.S. stock futures slipped as investor anxiety resurfaced over President Donald Trump's unpredictable tariff policies and their implications for the American economy. Contracts tied to the S&P 500 declined by 0.2%, indicating a turbulent end to a week that saw equities swing between gains and losses.

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Meanwhile, the dollar strengthened slightly, and U.S. Treasury yields held steady. Asian markets also struggled, while European equities showed relative resilience.

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The renewed focus on tariffs has become a major force shaping market direction. The lack of clarity around Trump’s trade plans — especially their scope and economic effects — has forced investors to reassess their risk exposure. With concerns mounting over slower economic growth and rising fiscal pressures, market participants are watching data closely for signs of how trade policies are impacting the broader economy.

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On Thursday, U.S. Treasury Secretary Scott Bessent admitted that trade negotiations with China had hit a snag. At the same time, Trump received a temporary legal win from a federal appeals court, granting a brief reprieve from a ruling that could have dismantled much of his trade agenda. Despite this, Trump’s aides continue to insist that the administration is committed to pressing ahead with its tariff strategy in one form or another.

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Dan Boardman-Weston, chief investment officer at BRI Wealth Management, summarized the prevailing mood: “The setup is quite pessimistic, whether you look at trade, fiscal outlooks, inflation, valuations — you name it. We’re keeping some cash on the sidelines because I expect volatility is here to stay for a while.”

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Later in the day, investors are expected to turn their attention to the U.S. personal consumption expenditures (PCE) price index, excluding food and energy. This index is the Federal Reserve’s preferred measure of core inflation and will be scrutinized for insights into the economy’s health and any potential shifts in interest-rate policy.

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While the April inflation data is expected to show only a mild impact from the latest tariffs, economists believe the effect will become more pronounced in the coming months. A recent report underscored this concern, showing that the U.S. economy contracted in the first quarter, largely due to weaker consumer spending and a more severe trade drag than initially reported.

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Adding to the mix, Trump recently met with Fed Chair Jerome Powell — their first in-person meeting since Trump’s inauguration — and urged the central bank to cut interest rates. However, the Fed reiterated its stance that future monetary policy decisions will depend entirely on incoming data and the evolving economic outlook. Currently, money markets are pricing in two interest-rate cuts of 25 basis points each by the end of the year.

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While U.S. markets wobble under the weight of tariff uncertainty, European stocks are gaining ground. The Stoxx 600 index rose 0.4%, putting it on track for its best monthly performance since January.

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The region has benefited from relatively more positive investor sentiment compared to the U.S. According to Bank of America, citing EPFR Global data, European equity funds attracted about $1 billion in inflows during the week ending May 28. In contrast, U.S. stock funds saw outflows totaling approximately $5.1 billion.

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Win Thin, global head of markets strategy at Brown Brothers Harriman & Co., noted, “No matter what happens, markets realize that we are facing a long period of uncertainty. Allowing tariffs to stay in place increases the risk of stagflation, which is bad news for both the dollar and equities.”

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In short, the market remains caught between mixed signals — on one hand, optimism about resilient economic fundamentals and hopes for Fed rate cuts; on the other, rising concerns about the long-term damage from trade tensions. With the White House firm in its tariff stance and economic data beginning to reflect the strain, investors are bracing for continued volatility and a rocky road ahead. Until greater clarity emerges on trade policy and its actual economic impact, markets are likely to remain on edge.

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