The U.S. economy has shown resilience over the past two years despite challenges like a slower job market, trade tensions, and rising inflation. However, economists are now cautioning that a mix of new and ongoing issues could challenge this strength. Ed Yardeni, president and chief investment strategist at Yardeni Research, noted in a Sept. 14 report that the list of economic concerns is becoming more alarming. Although the economy continues to grow and consumers are still spending, several risks could impact growth and the stock market, which has driven a recent wealth boom. Oil prices have risen in recent weeks, with the international benchmark, Brent crude, reaching $108.45 per barrel. This increase follows ongoing conflicts in the Middle East, which have disrupted global oil supplies. U.S. diesel prices have also hit a record high of $6.23 per gallon, according to AAA data. The Consumer Price Index, which measures inflation, rose by 3.4% annually in August—higher than expected and above the Federal Reserve’s 2% target. Low- and middle-income households are particularly affected, as rising fuel costs and concerns over potential trade barriers have reduced consumer confidence. Oxford Economics noted that consumer sentiment, as measured by the University of Michigan, fell to its second-lowest level in history this month. With continued violence in the Middle East, there is a risk that oil prices could climb above $120 per barrel, according to Goldman Sachs. This would add to the already high energy costs faced by Americans and create new pressures on U.S. businesses. Yardeni warned that if these higher energy costs persist, they could eventually slow economic growth. The Federal Reserve is set to decide on interest rates this week, with many economists expecting the first rate increase in over three years. A series of hikes could raise borrowing costs for consumers and businesses, slow inflation by reducing economic activity, and potentially pressure stock prices by tightening financial conditions. The U.S. national debt has recently surpassed $40 trillion, and the federal government already spends more on interest payments than on national defense or Medicare. If the Federal Reserve raises interest rates, the government could face even higher debt costs, as it would need to pay investors higher returns on its borrowing. Yardeni explained that rising interest rates could worsen the budget deficit and require more Treasury issuance. Meanwhile, much of the stock market’s recent gains have been driven by expectations for artificial intelligence (AI) companies. However, investors are now questioning whether the earnings from AI will justify the heavy spending on the technology. This has led to concerns about a potential stock market downturn, which could affect consumer spending, particularly among higher-income households. This economic trend is sometimes referred to as a "K-shaped economy," where wealthier individuals, who have benefited from stock market gains, continue to spend, while lower-income households struggle with rising living costs. However, if AI valuations fall and the broader market declines, consumer spending could slow. Brandon Zureick, chief economist at Johnson Investment Counsel, warned that the upper end of the K-shape is crucial for maintaining overall consumer spending and economic growth. If that segment is affected, the impact could be significant.