Veteran fund manager who predicted April rally updates S&P 500 forecast originally appeared on TheStreet.

It's been quite a rally.

After stocks were deeply oversold in early April following what President Donald Trump called his Liberation Day tariff reveal, the S&P 500 has posted rip-roaring returns, gaining 20% in about six weeks.

The rally caught many investors off guard. The potential for tariffs to increase inflation, zapping economic activity and corporate profitability, had sent stocks down 19%, just shy of bear-market territory.

One investor who wasn't surprised was the Wall Street veteran hedge fund manager Doug Kass.

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Kass has been investing professionally since the early 1970s. His career, which includes a stint as research director for billionaire Leon Cooperman's Omega Advisors, has enabled him to make several savvy calls, including forecasting the bull market top in 2021 and bear market low in 2022.

More recently, Kass correctly predicted a stock market reckoning this year in December and accurately called for the S&P 500 to bottom after its tariff-driven selloff in April.

Kass updated his view on stocks this week, and his latest thoughts may frustrate some investors.

The US economy has slowed markedly from its pace last summer, and that should be bad news for the S&P 500, given corporate revenue and profit growth are cornerstones of stock market valuation.

The economy's headwinds include shifts in consumer spending toward essentials from discretionary buys amid sticky inflation; a weak jobs market, and eroded consumer and business confidence.

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The uncertainty associated with stiff tariffs and mounting US debt adds to the pressures.

In short, the backdrop isn't nearly as favorable as it was for stocks in 2023 and 2024, when optimism that the Federal Reserve would shift from hawkish to dovish monetary policy and growth in spending on artificial intelligence fueled back-to-back 20%-plus returns for the S&P 500.

Inflation has retreated since it peaked above 8% in 2022. However, core inflation remains above the Fed's 2% target. The latest core Consumer Price Index and Personal Consumption Expenditures data show inflation at 2.8% and 2.5% in April, respectively.

Meanwhile, the Fed's rate cuts last September, November and December have yet to reverse recent job losses. The unemployment rate has increased to 4.2% from 3.4% in 2023. According to Challenger, Gray & Christmas, companies have announced over 602,000 layoffs this year, up 87% from last year.