The US stock market and economy have been on quite a rollercoaster ride lately, with several key factors playing a significant role. First and foremost, the Federal Reserve’s monetary policy has been a major player. In December 2024, the Fed decided to shift its stance, which sent ripples through the market. Investors, who were already on edge, reacted with a mix of excitement and trepidation. Fast forward to today and we are seeing geopolitical tensions that make one think you’ve had too much coffee. 1.
The other major development last week was the announcement of new tariffs. The ongoing trade negotiations and occasional spats between major economies have created an environment of uncertainty. It’s like watching a soap opera where you never know if the next episode will bring a dramatic reconciliation or another cliffhanger. This uncertainty has made investors cautious, leading to fluctuations in stock prices and market sentiment. Of course, it’s too early for these tariffs to be reflected in macroeconomic data or corporate earnings, but history suggests that trade wars tend to slow economic activity. 2.
Moving the market last year, performance of the tech sector has been front and center. The US tech industry has continued to show resilience and innovation, driving market growth. However, with great power comes great responsibility, and tech companies have faced increased scrutiny and regulatory challenges. Everyone loves you when it seems like the sky is the limit, but the pressure is always on to keep performing. 1.
Inflation has also been a hot topic, quite literally. Rising prices have affected everything from groceries to gas, putting a strain on consumers’ wallets. The Fed’s efforts to manage inflation have been walking a tightrope – trying to balance between stimulating growth and keeping prices in check. It’s a delicate dance, and one misstep could send the economy tumbling. 2.
Lastly, the global economic landscape has had its share of influence. Factors such as China’s economic policies and more recently DeepSeek coupled with Europe’s financial stability have had a ripple effect on the US market. Investors have had to keep a close eye on international developments to navigate the ever-changing market terrain. 3.
In summary, the US stock market and economy have been shaped by a mix of monetary policy, geopolitical tensions, tech sector performance, inflation, and global economic factors. Regardless of political cycles, we avoid selling quality investments based on short-term policy shifts. We continue to maintain a domestic overweight in our portfolios and are confident that company leadership teams will successfully navigate these challenges while offering their expertise to policymakers. It’s a complex and dynamic environment, but with a bit of humor and a lot of resilience, investors continue to navigate these choppy waters.
