While many Americans are worried about where the U.S. economy is heading, few have changed their spending habits in anticipation of a slowdown.

Nearly three-quarters, or 73%, of adults said they are “financially stressed,” with most pointing to the tariff wars as the culprit, according to a recent CNBC/SurveyMonkey online poll.

And yet, consumer spending has remained remarkably resilient.

In part because of looming tariffs, shoppers are panic buying. In fact, consumer spending was even stronger than expected in March, according to the Commerce Department and ticked up again in April, data released Wednesday from J.P. Morgan showed.

J.P. Morgan also raised its odds for a U.S. and global recession to 60%, by year end, up from 40% previously.

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In a speech earlier this month before business journalists in Arlington, Va., Federal Reserve Chair Jerome Powell said “the economy is overwhelmingly driven by consumer spending.” Powell also said that he expects President Donald Trump’s tariff policies to raise inflation and lower growth.

Most experts agree that in the face of higher prices for many consumer goods, Trump’s tariffs are igniting a fresh wave of declining sentiment, which plays a big part in determining where the economy is headed.

The Conference Boards’ expectations index, which measures consumers’ short-term outlook, plunged to its lowest level in 12 years and well below the recession threshold, signaling heightened recession risk. The University of Michigan’s consumer survey also showed sentiment sank by more than 30% since December among persistent worries of a trade war.

“On-again, off-again rising tariffs and resulting turmoil in the stock market and world economy are clearly impacting consumer concerns about higher prices and future consumer spending growth,” Jack Kleinhenz, chief economist of the National Retail Federation, said in a statement.

The Trump administration’s tariffs on a host of other countries are currently in the middle of a 90-day pause, with a 10% baseline tariff rate instead applying to all imported goods across the board. The pause is due to expire on July 9, with Trump touting a series of rate negotiations with foreign leaders between now and then.

According to an analysis by the Urban-Brookings Tax Policy Center, if the lower tariff rates in effect during the 90-day pause remain in effect permanently, it could reduce real income for the average taxpayer by about $3,100 in 2026. A separate study by the Budget Lab at Yale estimates that tariffs could cost the average household roughly $3,800 per year.

“Household budgets remain under pressure and highly sensitive to further price increases,” said Greg McBride, chief financial analyst at Bankrate. “Inflation will continue to be central to how consumers feel about their finances, and their capacity for additional spending.”

At that point, consumers will have to reign in their spending, whether they want to or not, she said, which could lead to an economic drop-off in the months ahead. That prediction was also recently shared by JPMorgan analysts in a research note on Wednesday and Federal Reserve Bank of Chicago President Austan Goolsbee on Sunday.

“We should be worried,” Indarte said.  

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Warren Buffett is sitting on a record amount of cash.

That’s not necessarily something everyday investors should emulate. If you have money on the sidelines, it may be time to rethink your strategy, experts say.

Buffett’s conglomerate Berkshire Hathaway, with a diverse portfolio of businesses, was sitting on a record $334 billion in cash at the end of last year.

Yet in a February letter to shareholders, Buffett told shareholders that “despite what some commentators currently view as an extraordinary cash position,” the majority of the money invested in Berkshire is in equities.

“Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned,” Buffett wrote.

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In hindsight, Buffett’s cash position looks wise, as Trump administration tariff policies have caused market turbulence.

Investors have also been thought to have a cash cushion. There is $6.88 trillion in money market funds as of the week ending April 16, according to the Investment Company Institute — even though higher interest rates have made it possible to earn more on cash.

Yet even as the markets have flirted with bear territory, experts still say it’s possible to have too much money on the sidelines.

In the stock runup of 2024, a “plain-vanilla version” of a 60/40 portfolio gained about 15%, according to new Morningstar research. The portfolio includes a 60% weighting in the Morningstar US Market Index and 40% in the Morningstar US Core Bond Index.

Yet a diversified portfolio of 11 different asset classes only gained about 10%, the research found. That included larger cap domestic stocks, developed markets stocks; emerging markets stocks; Treasuries; U.S. core bonds; global bonds; high yield bonds; small cap stocks, commodities; gold and REITs.

Major shifts in U.S. tariff policy may change how well those strategies perform going forward. Thus far in 2025, a diversified portfolio has held up better, with gold gaining about 32% this year, according to Amy Arnott, portfolio strategist at Morningstar. Meanwhile, commodities, global bonds and real estate have held up better than U.S. stocks, she said.

With interest rates higher, cash has been a better portfolio diversifier than Treasuries in recent years, according to Morningstar’s research.

Notably, those cash allocations are best held outside the portfolio in an emergency fund or for any large expenses that may come up in the next two years, Arnott said. Current retirees may want to have at least one to two years’ worth of portfolio withdrawals in cash, she said.

With current turmoil and market uncertainty, it’s important to remember that making radical shifts to your portfolio can often backfire, Arnott said.

“If you’ve had an asset allocation that was a good fit for your time horizon and your investment goals previously, it’s probably not a good idea to be making dramatic changes to that just because of all the uncertainty that’s going on right now,” Arnott said.

Investors who have an ample cash position to fit their needs do tend to feel more confident now, said Adrianna Adams, a certified financial planner and head of financial planning at Domain Money.

However, for those who already have a sufficient emergency fund, the best use for extra cash is typically in the markets, Adams said.

“I wouldn’t recommend holding cash if we’re using that account or allocation towards our long-term goals,” Adams said. “If we’re going to need the money in the next two years, then absolutely, we should keep it in cash.”

High-yield savings accounts tend to be a favorite among consumers for emergency funds, Adams said. However, individuals in high-income tax brackets may want to consider municipal money market funds that help limit the tax bills they will pay on the interest they earn on that money, she said.

Typically, you should avoid selling assets when the stock market is down, especially during earlier retirement years. Those early withdrawals paired with market dips can stunt your long-term portfolio, known as the “sequence of returns risk.”

Negative returns are more harmful early in retirement than later because you could miss more years of compound growth, according to a 2024 report from Fidelity Investments.

That’s why flexibility is important when it’s time to pull funds from your retirement savings, Caswell said. 

Caswell recommends a bond ladder of Treasuries that mature every six months or one year for up to five years. You can also use the ladder method with certificates of deposit. 

As assets mature, you can use the proceeds to cover living expenses. Alternatively, you could reinvest part of the cash if you receive more than you need, he said.

The strategy provides “more transparency and control” of when you’re taking money out of that part of your portfolio, Caswell said.

You could also weigh a ladder of so-called Treasury inflation-protected securities, or TIPS, according to Amy Arnott, a portfolio strategist with Morningstar Research Services.

Issued and backed by the U.S. government, TIPS can provide a hedge against inflation because the principal rises or falls based on the consumer price index. 

“Inflation and loss of purchasing power can be a risk with bonds, which is why a TIPS ladder can be attractive,” especially when you’re able to get a positive return, she said.