If you followed the seasonal investing advice of “sell in May and go away,” you may want to reconsider because the outlook for the economy and financial markets will likely be determined in the coming months.

Several major events, datasets, progress reports, and deals are due this summer. By fall, the impact of President Donald Trump’s tariffs and fiscal policies should be clearer, giving the Federal Reserve enough confidence to act on interest rates.

Here’s a look at the factors that will tip the scales:

“One Big Beautiful Bill”

A key piece could come as soon as this week. Trump has set a July 4 deadline for Congress to pass his so-called One Big Beautiful Bill, which contains his tax cuts and spending priorities.

While the House of Representatives passed one version of the legislation and the Senate advanced a separate one, the GOP’s narrow majorities in both chambers make the timing of the eventual package and its exact provisions less certain.

All the congressional logrolling that’s needed could push the timeline past July 4, especially now that a few Republicans have announced they will not seek reelection, making them less susceptible to Trump’s arm-twisting.

Wall Street expects the tax cuts to juice the economy and the stock market, while the bond market will watch the bill’s impact on U.S. debt. The Congressional Budget Office has estimated the Senate’s version of the bill will add nearly $3.3 trillion to deficits over a decade.

More fiscal sticker shock could send Treasury yields higher and add more pressure on the dollar, which is already down 10% this year, its worst first-half performance in more than 50 years.

Debt ceiling

Treasury Secretary Scott Bessent has estimated that the U.S. will no longer be able to pay its bills by mid- to late summer, unless the debt ceiling is raised.

While he has vowed that the U.S. will never default, it’s up to Congress to raise the debt limit so that the Treasury Department can issue fresh bonds to service interest expenses and maturities.

The Big Beautiful Bill would increase the debt ceiling by trillions of dollars. In the meantime, the Treasury Department has been using its extraordinary cash management measures to avoid default.

Bessent said last week he extended his department’s authority to use those extraordinary measures to July 24, in an apparent reminder for Congress to raise the debt ceiling before its typical August recess.

Failure to raise the debt limit and prevent a U.S. default would spark a global financial meltdown.

Tariffs and trade deals

Trump administration officials have been saying since “Liberation Day” in April that major trade deals are imminent. So far, the U.S. has reached agreements with the U.K. and China, while negotiations with other top trade partners continue.

Meanwhile, the 90-day pause on Trump’s “reciprocal” tariffs will expire on July 9, after which they would spike back to levels that triggered an epic stock market selloff.

Bessent has signaled flexibility on that deadline, saying a dozen or so trade deals could be reached by Labor Day. But over the weekend, Trump reiterated his desire to dispense with any further talks and unilaterally set a tariff rate on each country.

A sudden return to high tariffs would deliver another jolt to Wall Street, which had been expecting duties to eventually settle at 10% for most countries and 30% for China—manageable levels that could largely be absorbed without too much pain.

Federal Reserve

Tariffs and their impact on inflation will heavily influence the central bank as it weighs whether to trim interest rates. Pricing data so far hasn’t revealed a big impact from tariffs, and a few Fed officials have said that’s evidence that inflation is tame enough to justify rate cuts.

But Fed Chairman Jerome Powell and other policymakers have indicated they need at least a few more months of data to be confident that inflation is indeed on the right track.

If the upcoming data show that any tariff-related inflation effects are only one-offs that aren’t raising consumers’ inflation expectations over the longer run, then rate cuts could come in the fall.

While Trump has demanded the Fed lower rates immediately, he could also make it harder for policymakers to do that. They may more reluctant to cut just to prove to markets that they are independent from political pressure. Re-escalation of tariffs could muddy the inflation picture. The naming of a “shadow” Fed chair could even stir a revolt on the Federal Open Market Committee.

Corporate earnings

Starting in July, earnings reports for the second quarter will start coming out, giving Wall Street a more fulsome view of how tariffs—and the economic uncertainty they’ve caused—are affecting profits as well as the outlook for profits.

Because companies rushed to stock up on imports earlier in the year to get ahead of tariffs, first-quarter results didn’t fully reflect higher rates.

But those stockpiles are being exhausted, forcing companies to hike prices on consumers or eat tariff costs and shrink profit margins.

Also factoring into earnings will be how much or how little companies plan to invest and hire in an economy that is slowing amid Trump’s trade war.

The White House’s fiscal policies will sway earnings too, as tax cuts, the end of certain tax credits, more spending on defense, and less spending on the social safety net ripple through corporate America and consumers.

Wild card: The Middle East

A tenuous ceasefire has taken hold between Israel, Iran, and the U.S., sending oil prices lower as markets worry less about a sudden supply disruption.

But Trump has said he is open to bombing Iran again if it’s necessary to cripple Tehran’s nuclear program. That’s as conflicting reports emerge over how much Iran’s capabilities have actually been damaged.

Renewed fighting could set off another surge in crude prices, sapping consumers of spending power, reigniting inflation, and further complicating the outlook for Fed rate cuts and the economy.

Have a great summer.

Is it a mistake for the Fed not to cut borrowing costs?

Is it a mistake for the Fed not to cut borrowing costs?

The U.S. economy has been full of surprises since the Federal Reserve started rapidly raising interest rates to quell inflation back in 2022. The latest shocker might just be that the Trump administration’s tariffs haven’t pushed up inflation more.

Since April, taxes on foreign-made and imported goods have been the highest in nearly a century, after President Donald Trump announced a universal baseline levy on every country that trades with the U.S., introduced massive industry-based tariffs and briefly escalated tensions with China. Even so, price increases — including on the items at the front lines of the trade war — have been relatively tame. Inflation has risen less than economists’ forecasts for the past two months.

The conundrum matters for Fed officials, who’ve pressed the pause button on their rate cuts out of fear that they might make any tariff-induced price shock worse.

Those price increases could still be coming. Earlier this year, companies rushed to build up inventories in anticipation of Trump’s tariffs, but that extra supply will eventually run out. The Fed could temper inflation by keeping rates high, but that strategy comes with risks of its own, at a time when the latest economic data suggests that cracks could be forming in the once-formidable U.S. job market.

The Fed has been sitting back, evaluating economic data amidst all the uncertainty. The old saying that you skate to where the puck is going to be — if you don’t know where the puck is going to be, you can’t skate to it. — Greg McBride, CFA, Bankrate chief financial analyst

The Fed’s rate-setting Federal Open Market Committee (FOMC) is unlikely to feel confident enough that they can get back to cutting borrowing costs when they announce their next interest rate decision on June 18, economists interviewed by Bankrate say. That means the price that you pay to finance big-ticket purchases — from a car to a home remodel — will remain at a near-decade high. The returns you earn on your savings, meanwhile, will stay competitive, especially if you’re keeping your cash in a nontraditional, online bank that rewards its depositors with high yields.

Beyond not knowing how tariffs could impact the economy, another landmine that officials may have to navigate is political pressure. Trump in recent weeks has renewed his attacks on the U.S. central bank, saying Fed Chair Jerome Powell is always “too late” to adjust borrowing costs and that he “might need to force something.” After job growth in May topped expectations, Trump demanded that the Fed cut their key borrowing benchmark a full point. Vice President J.D. Vance even started to join the chorus of calls for rate cuts after May’s surprisingly tame consumer price index (CPI) report, describing keeping rates high as “monetary malpractice.”

Trump told reporters in early June that he’ll announce his pick for Fed Chair Jerome Powell’s replacement “very soon.”

Here are the biggest themes to watch at the Fed’s next meeting, including why the Fed isn’t cutting borrowing costs yet — and whether there could be some legitimacy to Trump’s calls for lower rates.

Why isn’t the Fed cutting interest rates? Officials are still cautious that tariffs could eventually push up inflation

For now, the big debate at the Fed will be whether tariff-induced price increases have ended or if they are just delayed. Two soft inflation reports might not be enough evidence yet for policymakers who’ve been hearing from business contacts for months that they’re likely going to hike prices.

“We’ve had — the last two months — excellent inflation reports, but when we’re out talking to people, they’re like, ‘Oh just wait,’” said Chicago Fed President Austan Goolsbee at a public appearance in early June. “I would say surprisingly little direct impact so far in the data that’s coming out, but with the question mark, we don’t know if that will remain true in the next month or two.”

Some companies have already started to pass along those higher prices, according to separate business surveys from the New York Fed and Cleveland Fed. Others say price hikes could return in the coming months, the survey showed. Even if companies pass along just half of those higher tariff costs, retail prices could rise almost a full percent, models from the Atlanta Fed show.

National brands including Walmart, Home Depot and Best Buy have warned that they might eventually have no choice but to raise prices, the longer tariffs eat into their profit margins. Target CEO Brian Cornell called price hikes a “very last resort.”

“The difficulty level has been incredibly high given the rates we’re facing and the uncertainty about how these rates in different categories might evolve,” Cornell said during an earnings call with analysts in late May.

Inflation has long operated with a lag. After the Trump administration lifted levies on washing machines to as high as 50 percent in January 2018, those products didn’t surge in price until the following April, according to a Bankrate analysis of BLS data. Those figures wouldn’t have been released until May of that year.

Major appliances rose 4.3 percent last month, the sharpest gain since August 2020. But there was little evidence of tariff-induced price hikes in other commonly imported goods. Goods prices were flat when excluding the volatile food and energy categories. Apparel prices as well as used and new vehicle prices also fell.

“It’s hard for the Fed to think about how much inflation is going to go up,” says Derek Tang, economist and CEO at LHMeyer, a monetary policy research team founded by former Fed Governor Larry Meyer. “But because there’s this risk it will go up, the Fed needs to make sure it doesn’t cut too soon. Their bias is to wait a little bit longer.”

What if tariffs don’t push up inflation? Some Fed officials say it could be possible

But there could be another, more harrowing culprit for the relatively tame inflation data: Consumers might be starting to pull back.

“What I’m hearing from retailers is that consumers are about tapped out,” said Richmond Fed President Tom Barkin in a public appearance from early May. “It’s nice to say you’re going to pass it on, but it’s not as easy to pass it on as you might think.”

Companies having little room to hike prices is one reason former St. Louis Fed President Jim Bullard said in a recent interview with Bankrate that officials should be more concerned about tariffs causing a recession, not inflation.

“You can’t just go into a market and say, ‘All of a sudden, I’m just going to charge more for my product’ and not expect your demand to fall off,” he told Bankrate in an exclusive interview last month. “With high tariffs, you’re not going to have any demand at all for your product.”

Here’s what the former St. Louis Fed President thinks the Fed is getting wrong with inflation Bullard, now the dean of the Daniels School of Business at Purdue University, discussed the economy, tariffs and inflation in an interview with Bankrate. Read more

Some corners of inflation are already indicating that a slowdown in consumer spending may be afoot. Prices on many discretionary services — which tend to rise and fall depending on consumer demand — fell in May, including on airfares, ticketed events and hotels and motels, BLS data showed.

That comes at a time when nearly 2 in 5 Americans say they’re planning to cut back on either travel or experiences this year, according to a recent Bankrate survey.

“We never thought tariffs would lead to inflation in a sustained sense,” said Luke Tilley, chief economist at Wilmington Trust and a former economic advisor to the Philadelphia Fed. “I don’t think consumers can handle 10-15 percent price increases on imported goods and keep spending in other places because they’re much more strapped now.”

Fed Governor Christopher Waller, widely seen as a front-runner for Powell’s replacement, has said he doesn’t think tariffs will create another inflation problem like the pandemic. Consumer spending is already weakening, rising at the slowest pace since 2023 in the first three months of the year, according to the latest data from the Department of Commerce. The labor market is also considerably cooler today than it was in 2022, when prices surged.

“Workers don’t have much leverage to ask for raises and are probably more worried about keeping their jobs right now,” he said during a speech in early June.

Are Trump’s calls for a rate cut warranted? The U.S. economy is starting to flash some warning signs, experts say

As officials debate whether they should be concerned about inflation, cracks are appearing in the foundation of the U.S. economy.

The U.S. economy is still adding jobs, but they’re not broad-based, concentrated in only a few sectors: health care and leisure and hospitality. The nation’s unemployment rate is also near historic lows, but that’s because people are dropping out of the labor force, according to Kathy Bostjancic, chief economist at Nationwide.

Had the labor force remained steady in May, last month’s 4.2 percent unemployment rate would’ve risen to 4.6 percent, her calculations show.

“The labor participation rate might have fallen due to potential workers becoming too discouraged to look for a job due to softening in job prospects or it stemmed from reductions in immigration are reducing labor supply,” she said. “Data can be volatile month to month, so we will need further data to determine whether this emerges as a sustained trend.”

Americans are also staying unemployed for longer. The number of new applications for unemployment benefits has been at the highest level since October for two straight weeks, and the share of Americans who are continuing to file for weekly unemployment benefits is the highest since 2018, according to the latest data from the Department of Labor.

Fewer workers than before the pandemic are voluntarily quitting their jobs, often a reflection of their attitudes about the strength of the job market. Meanwhile, the rate at which workers are getting hired is the lowest since 2014.

“You have an economy that’s still chugging along, but the buffer is not that big, and we could be in a downturn pretty soon,” Tang said, referring to how much more room the economy has to cool before risking a more painful slowdown. “Normally, the Fed would say, ‘There could be a downturn. We don’t have that much space. Maybe we cut first to stop that from happening.’”

When could the Fed cut borrowing costs? Maybe not until July or September, these experts say

But even the dovish Waller doesn’t seem to think the Fed will cut interest rates until “later this year,” the official said in his last remarks before the Fed’s June meeting.

If you’re looking for clues on when those cuts might occur, you might be able to find some soon. Released along with the Fed’s June rate decision will be updated projections on where officials see the labor market, inflation and interest rates heading over the year ahead. Key for consumers will be whether policymakers continue to project two rate cuts this year, as they did when they last updated those projections in May.

Markets still expect that the Fed will cut borrowing costs twice in 2025, beginning in September and one more time in December, according to CME Group’s FedWatch tool. Tang, however, isn’t expecting any rate cuts until 2026.

But Tilley is projecting that the Fed will cut borrowing costs a full point this year, beginning in July, because the U.S. economy is on weaker ground than headline numbers may suggest.

“There is very little reason for them to keep rates as high as they are now,” he said. “They are taking comfort in decent economic data and are concerned about tariffs. We expect the data to deteriorate enough for cuts to begin.”

3 steps to take while borrowing costs stay high

If the Fed cuts rates because the U.S. economy takes a turn, that wouldn’t be good news for consumers, according to McBride.

“We romanticize this idea of the Fed cutting rates, but the reason they cut rates is really important,” McBride said. “We want the Fed to cut rates because inflation pressures have eased and the economy is continuing to chug along. We don’t want the Fed to be cutting rates because the economy is rolling over. And if the Fed is going to aggressively cut interest rates, it’s going to be because the economy rolled over.”

Economists put the odds of a recession by March 2026 at 36 percent, according to Bankrate’s latest Economic Indicator Survey. Those odds may rise or fall depending on tariffs, experts said.

If you’re trying to figure out what to do with your money in today’s uncertain economic environment, McBride advises you concentrate on two goals: recession-proofing your wallet and protecting yourself from high-interest debt.

Pay down debt Caret Down Icon After years of enduring historic inflation, Americans might not have much extra room in their budgets to ramp up their savings. One avenue, however, might be eliminating your credit card balances. The average credit card is charging consumers a 20 percent annual percentage rate (APR), even a full percentage point of cuts from the Fed. Despite rising recession odds, the best balance-transfer cards on the market offer up to 21 months of a 0 percent intro APR.

Go through your budget Caret Down Icon Americans typically have a greater chance of losing their jobs in a recession . Even those who remain employed, though, can see weaker wage growth and a drop in the value of their 401(k) or other investments. Regularly review your monthly expenses and make a note of any items you might cut back on or eliminate, if cash were to become tight.

Find the right place for your cash Caret Down Icon You might be able to grow your emergency fund just by putting your cash in a place where it’s rewarded. Swapping a next-to-nothing yield at a traditional, brick-and-mortar bank for an annual percentage yield (APY) worth 4 percent or more at a high-yield savings account can translate into significantly greater returns that only compound over time.

President Trump said on Tuesday during an official meeting at the White House with members of Congress, that the US and Japan had reached a trade deal.

“I just signed the largest deal in history with Japan,” Trump said during the meeting. The president said the agreement includes a 15% tariff on imported goods from Japan, and the country will invest $550 billion into the US.

Earlier on Tuesday, Trump said the US had also struck a trade deal with the Philippines, which will see the country’s imports face a 19% tariff into the US. Trump said US exports will face no import tax in the Philippines as part of the deal.

The White House unveiled new details of a confirmed trade agreement with Indonesia too. Yahoo Finance’s Ben Werschkul reports that a 19% tariff will apply to Indonesian goods, as well as a 40% rate on any “transhipped” goods. Officials said no tax would apply to “99%” of US imports.

The deal developments come as prospects for larger pacts with India and the European Union have soured. An interim deal between the US and India before an Aug. 1 deadline looks increasingly unlikely, according to Reuters.

The EU still wants a trade deal with the US but is preparing countermeasures as Trump’s hardline stance makes a no-deal outcome more likely, The Wall Street Journal reported.

“If they want war, they will get war,” a German official told the WSJ.

Trump is reportedly pushing for higher blanket tariffs on imports from the EU, throwing a wrench in negotiations ahead of an Aug. 1 deadline for sweeping duties to take effect. He has threatened 30% tariffs on all imports.

Last week, Trump said he would soon send letters to over 150 smaller US trade partners, setting blanket tariff rates for that large group. Trump has already sent letters to over 20 trade partners outlining tariffs on goods imported from their countries.

Earlier in July, Trump announced a 35% tariff on Canadian goods and followed that up with promises of 30% duties on Mexico and the EU. The letters have at times upended months of careful negotiations, with Trump saying he is both open to reaching different deals but also touting his letters as “the deals” themselves.

Treasury Secretary Scott Bessent on Tuesday said he expected many deals to take shape over the next several days.

Read more: What Trump’s tariffs mean for the economy and your wallet

Here are the latest updates as the policy reverberates around the world.

LIVE

1479 updates

President Trump said on Tuesday during an official meeting at the White House with members of Congress, that the US and Japan had reached a trade deal.

“I just signed the largest deal in history with Japan,” Trump said during the meeting. The president said the agreement includes a 15% tariff on imported goods from Japan, and the country will invest $550 billion into the US.

Earlier on Tuesday, Trump said the US had also struck a trade deal with the Philippines, which will see the country’s imports face a 19% tariff into the US. Trump said US exports will face no import tax in the Philippines as part of the deal.

The White House unveiled new details of a confirmed trade agreement with Indonesia too. Yahoo Finance’s Ben Werschkul reports that a 19% tariff will apply to Indonesian goods, as well as a 40% rate on any “transhipped” goods. Officials said no tax would apply to “99%” of US imports.

The deal developments come as prospects for larger pacts with India and the European Union have soured. An interim deal between the US and India before an Aug. 1 deadline looks increasingly unlikely, according to Reuters.

The EU still wants a trade deal with the US but is preparing countermeasures as Trump’s hardline stance makes a no-deal outcome more likely, The Wall Street Journal reported.

“If they want war, they will get war,” a German official told the WSJ.

Trump is reportedly pushing for higher blanket tariffs on imports from the EU, throwing a wrench in negotiations ahead of an Aug. 1 deadline for sweeping duties to take effect. He has threatened 30% tariffs on all imports.

Last week, Trump said he would soon send letters to over 150 smaller US trade partners, setting blanket tariff rates for that large group. Trump has already sent letters to over 20 trade partners outlining tariffs on goods imported from their countries.

Earlier in July, Trump announced a 35% tariff on Canadian goods and followed that up with promises of 30% duties on Mexico and the EU. The letters have at times upended months of careful negotiations, with Trump saying he is both open to reaching different deals but also touting his letters as “the deals” themselves.

Treasury Secretary Scott Bessent on Tuesday said he expected many deals to take shape over the next several days.

Read more: What Trump’s tariffs mean for the economy and your wallet

Here are the latest updates as the policy reverberates around the world.

LIVE

1479 updates

A high-profile feud between President Trump and billionaire Elon Musk continued to simmer on Friday after a Thursday crescendo saw more than $150 billion in value wiped from Tesla (TSLA) stock, prompting at least one investor to call Musk’s government foray a “disaster” and leaving the future of Musk’s government entanglements in question.

“This is a disaster of epic proportion for Tesla and SpaceX,” Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management CEO, told Yahoo Finance.

“And whether Elon wants to accept it or not, he did help Trump get elected. It is his fault that Trump is president of the United States.”

Thursday’s sell-off came after Musk slammed Trump’s GOP-backed spending bill, prompting fiery responses from the president and raising concerns over the political risk now tied to one of the world’s most valuable companies.

Tesla stock rose as much as 6% Friday as Musk and Trump moved to cool tensions. The stock finished the trading session up a more modest 3.7%.

Read more about Tesla’s stock moves and today’s market action.

Musk endorsed the then-Republican candidate soon after the assassination attempt on Trump in Butler, Pa.

Afterward, Musk frequently appeared at rallies, voicing his support for the Republican Party at large and pledging millions to America PAC, a Trump-aligned super-PAC. A flood of support for Trump from the tech community followed as Musk became one of Trump’s biggest public boosters in the final days of the campaign.

After Trump was elected, the president appointed Musk as head of the newly formed Department of Government Efficiency, otherwise known as DOGE. The purpose of the agency was to eliminate government waste.

Musk officially exited the role late last month, claiming the agency had cut billions of dollars in costs.

Days later, Musk began openly criticizing Trump’s controversial tax legislation, which is estimated to add trillions to the national debt over the next decade.

The bill would also eliminate EV tax credits, a crucial government incentive for Tesla and a potential “death blow” to the company’s sales, according to Gerber. Having cleared the House, the bill now heads to the Senate, with Trump vowing to sign it into law by July 4.

“I’m sorry, but I just can’t stand it anymore,” Musk posted Tuesday on X. “This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination. Shame on those who voted for it: you know you did wrong. You know it.”

The post opened the floodgates for a days-long escalation between the once-close confidants turned rivals. Trump wrote he was “very disappointed” in his former ally, while Musk fired back, saying the president wouldn’t have won the election if it weren’t for him.