A recent survey of ARQ Wealth’s clients revealed that inflation and politics are two of the top economic concerns at the midway point of 2025. Investors are concerned that these two factors could impact the stock market, their retirement portfolios, and financial plans over the coming years. But do these fears hold legitimate weight? And, if so, how can you prepare?
This guide will examine the current state of the U.S. economy, inflation, and geopolitics in an attempt to ease some of these concerns.
That said, if you have a specific question about how inflation or geopolitics could impact your portfolio, then it’s best to speak directly with an ARQ Wealth financial advisor. Our team of advisors can offer more specific insight into the state of the economy and provide personalized advice to match your financial goals.
Inflation and Politics: Our Clients’ Top Economic Fears
Data from our ARQ Wealth 2025 Client Survey revealed interesting insights into the biggest perceived risks in today’s market. The data highlighted three main concerns from our clients:
- Global Geopolitical Tensions: 60% of respondents highlighted this as a top risk.
- Stock Market Volatility: 60% of respondents highlighted this as a top risk.
- Inflation: 24% of respondents highlighted this as a top risk.
These concerns aren’t unique to our clients, either. Respondents in a study conducted by the World Economic Forum felt similarly, with 86% of participants identifying rising geopolitical fragmentation and protectionism as the most significant long-term threat.
So, how is America’s economy faring at the mid-way point of the year? Let’s answer that question by looking at the most recent data for several key economic indicators: Inflation, consumer sentiment, consumer spending, and the stock market.
How is America’s Economy at the 2025 Mid-Point?
America’s economy, despite a turbulent start to the year, is showing resilience and surprising strength. Let’s examine the data.
Inflation
As a reminder, inflation is the rate at which prices rise over a given period. When inflation rises, the higher prices mean that your budget won’t go as far as it did in previous years. Rising prices are especially impactful for those on fixed incomes.
At the beginning of 2025, there was widespread concern that the Trump Administration’s aggressive tariff policies could lead to price fluctuations for American companies and, thus, price increases for consumers. However, core inflation data tracked by the Bureau of Labor Statistics shows that this has not been the case so far throughout 2025.
Here’s how the consumer price index (a key gauge of rising costs) has trended through the first half of 2025:
- January: 3%
- February: 2.8%
- March: 2.4%
- April: 2.3%
- May: 2.4%
- June: 2.7%
America’s economic policymakers aim for an annual inflation rate of 2%. So while inflation is above this target rate, it has still been fairly close to a normal rate.
For reference, inflation hit a recent peak of 9.1% in 2022 following the Covid-19 pandemic. During this time, food prices, energy prices, and gasoline prices were spiking rapidly, throwing budgets into a lurch for both consumers and businesses. In response, the Federal Reserve Bank (America’s central bank) raised interest rates. While this tends to decrease economic activity, it also helps stifle high inflation.
By comparison, 2025’s inflation rate has been much tamer and closer to the target of 2%. While inflation is slightly higher than the target rate, there is general price stability for staple goods.
Additionally, the Fed’s monetary policy is much more relaxed than in years past, with no interest rate hike on the horizon. While this could change at any moment, inflation is not currently a major economic concern for now.
Consumer Sentiment
Consumer sentiment, or how optimistic Americans feel about the economy, has been increasing in recent months.
Data from the University of Michigan shows that consumer sentiment increased in June 2025 after falling earlier in the year after the Trump Administration announced its tariff plan.
That said, consumer sentiment still sits below its historical average as many consumers still expect dramatic price changes in the near future. Experts from the University of Michigan believe sentiment will stay below average until consumers feel assured that inflation is unlikely to worsen.
Consumer Spending
Consumer spending is another important economic indicator that drives the American economy, accounting for two-thirds of the nation’s Gross Domestic Product in the first quarter of 2025.
Strong consumer spending is a sign of a flourishing economy, where households have excess cash and are spending freely on new products or services. Strong spending often leads to stronger sales for corporations, which can send stock prices and retirement values soaring.
Retail sales increased 0.6% in June after falling for the two months prior. While it would be ideal to see surging sales, the fact that sales are not in a free fall is still a positive sign that consumers are still spending at regular levels.
Stock Market
Some economists view the stock market as a sign of economic strength. A rising stock market is a sign of strong consumer spending and rising corporate profits, which can increase retirement account values.
America’s stock market had a highly volatile start to the year, with the S&P 500 falling roughly 15% from January to April, largely in response to President Trump’s aggressive tariff policies. This decline sparked a slight panic for many Americans as they watched the value of their portfolios dip, with no idea when the market might turn around.
However, once it became clear that the administration was willing and eager to finalize trade deals, the stock market began to rally.
As of July 2025, all three major indexes are now in the green, with the Dow Jones up 4%, the S&P 500 up 7%, and the tech-heavy NASDAQ Composite up 8%. The historical average return of the stock market is approximately 10%, which means that all three indexes are on pace for an above-average year despite the turbulent start to the year.
Strong investor interest in artificial intelligence (AI) has helped fuel this stock market rally, and many investors expect this trend to continue for the foreseeable future.
So what does this economic analysis tell us?
Bottom Line for the American Economy?
At the midpoint of 2025, the U.S. economy is showing resilience despite uncertainty around both inflation and politics. While challenges remain, especially around consumer confidence, trade policy, and the looming threat of an inflationary resurgence, recent data points to a stable foundation across key economic indicators.
If current trends hold, the second half of the year may bring continued recovery and measured optimism. Here are the key takeaways:
- Inflation has remained stable and fairly close to the Fed’s target rate of 2%, defying concerns tied to new tariff policies. The Federal Reserve will continue to take measures to keep inflation low.
- Consumer sentiment is improving, though still below historical norms, highlighting lingering caution from Americans.
- Retail sales rebounded in June, suggesting consumer spending remains strong and could support ongoing economic growth.
- The stock market has recovered from early-year losses, with all major indices in positive territory and trending toward average annual returns.
As always, continued monitoring of policy changes and economic signals will be critical to assessing the strength and direction of the U.S. economy heading into the final stretch of the year.
If you’re interested in getting a clearer picture of how the economy could impact your financial plan, then be sure to contact the team at ARQ Wealth. Our team of advisors can keep you updated on financial current events and offer guidance on how you should react to new updates.
Now that we’ve discussed the state of affairs domestically, let’s turn our attention to the global geopolitical environment.
Rising Geopolitical Tensions
The current geopolitical state is a bit less rosy than the American economy. Fortunately, it’s unlikely that current geopolitical trends will have a significant impact on the U.S. economy. Let’s explore why that is.
There are several major geopolitical trends in the world today:
- Economic Fragmentation: For decades, the world has been growing increasingly globalized, with countries trading freely with each other and routinely shipping foreign goods all over the world. However, we may be moving towards a more fragmented approach with many countries aiming to minimize their reliance on other economies. This trend began in the wake of the Covid-19 pandemic that sparked mass supply chain issues, and has been partially accelerated by aggressive tariff polices set by the government
- Global Conflicts: There are still immense conflicts in the Middle East and between Ukraine and Russia. Although these issues are difficult to predict, it’s fairly safe to say that neither conflict appears to have any immediate resolution in sight.
- Trading Tensions: Trade relations between the U.S. and other economic leaders (mainly China) are constantly in flux. When it comes to China, recent trade agreements have paused the potential for a tariff war, but there is a growing rivalry in technology that could lead to unpredictable policy swings as both countries seek to secure domestic production and decrease reliance on each other.
Yes, geopolitical tensions are still prevalent in today’s world.
However, one word of optimism on this concern is that global conflicts rarely have a substantial, sustained impact on the U.S. economy. For example, even the Covid-19 pandemic had a relatively short-lived impact on the stock market, job market, and economic growth. And this was a once-in-a-lifetime global event.
The strength of America’s private sector (especially the tech industry) is the primary driver of the economy, jobs, and stock market growth. This growth, historically, has outpaced the impact of global geopolitical conflicts.
Inflation and Politics: Staying the Course in a Shifting Economic Landscape
While inflation and politics were cited as the top economic concerns among ARQ Wealth clients, the data paints a more encouraging picture.
Inflation
Inflation remains well within a manageable range, with prices rising at a pace far below the post-pandemic highs of 2022 (2.7% in June 2025 compared to 9.1% in 2022). Despite lingering fears about tariffs, the U.S. economy has shown impressive resilience, and inflation has not soared in the way that many economists were expecting.
In other positive news, consumer sentiment is rebounding, retail sales have returned to growth, and the stock market has staged a strong recovery, with all major indexes posting year-to-date gains. This upward momentum is further bolstered by long-term trends like the rise of artificial intelligence and continued strength in corporate earnings.
Politics
On the global stage, while conflicts and trade disputes persist, history has shown that the American economy, driven by innovation, consumer strength, and private sector resilience, can weather geopolitical storms. This trend has persisted for most of U.S. history, and will likely continue thanks to the rise of artificial intelligence technology and its impact on economic growth.
In short, the outlook is not without risks, but it is far from bleak. The key for investors is not to react emotionally to headlines but to take a disciplined, informed approach grounded in long-term planning.
Planning For the Future
If you’re feeling uncertain about how inflation or global tensions could impact your portfolio, now is the perfect time to talk with a professional.
At ARQ Wealth, our team of advisors is here to help you navigate today’s shifting environment with confidence. We offer personalized, forward-thinking financial strategies designed to protect and grow your wealth, no matter what the future holds.
Reach out to the ARQ Wealth team or call (480) 214-9572 to help ensure your financial plan is built to thrive in any economic climate.