A ceasefire in the Middle East is the latest twist for investors who have grown increasingly reactive to each new headline. Volatility has surged: prior to the ceasefire, the VIX had roughly doubled this year and averaged 25 in March—about 67% above year-end levels—underscoring just how uncertain the path forward has been.
For the second time in less than a year, the United States is engaged in military conflict in the Middle East. And once again, investors must assess how escalating tensions could affect markets.
At their most recent meeting, the Federal Reserve and Chair Powell told us that the risks of weakening labor and higher inflation had declined. It painted a nice picture of a soft landing, but wasn’t a recipe for immediate rate cuts.
The dot-com bubble burst in 2000. Now, 25 years later, anxiety abounds about the potential for a similar AI bubble burst and resultant crash.
The Federal Reserve cut its Fed Funds rate by 25 bps, the 10-year Treasury yield went up 10 bps, and the S&P 500 ended the month of October up over 2%. Let’s unpack those results.
As we write this, the market’s reaction to the government shutdown in the U.S. has been little more than a shoulder shrug. That would seem a rational response, particularly if this shutdown is short-lived.
Making the case for potential rate cuts in his recent speech at Jackson Hole, Fed Chair Powell noted that policy is presently in restrictive territory.
It is easy to invest when markets are rallying, but it can be tough for investors to stay in their seats when markets inevitably decline again.
While the immediate path for tariffs may drift lower, the U.S. legislative branch is hammering out a tax and spending bill that seems to favor tax cuts over lower spending, reviving worries over the U.S. budget deficit and a growing debt burden that cannot be ignored.
By the end of April, the S&P 500 rallied its way back, recovering nearly all the declines notched in the opening days of the month when President Trump's "Liberation Day" tariff plans tipped markets towards bear territory.
News related to tariffs, DOGE, geopolitical unrest, NVIDIA earnings, and more significantly impacted U.S. stock markets recently, with the S&P 500 retreating over 2.5% during the second half of February. There are signs that meaningful structural shifts are taking place in the market.
Investors, many of whom were worried about stock valuations before the election, have much to consider heading into 2025. There seems reason for some exuberance—but a rational exuberance, based upon a plausible foundation of corporate and economic health.
