The market has struggled since the start of the year, caught in a downtrend after making new highs in February. Investors are anxious, economic signals are mixed, and markets seem unsure of where the economy is headed. As of this briefing, the S&P 500 is down roughly 10% after bouncing off bear market territory just a few days ago.
Euphoria has clearly soured. The CNN Fear & Greed Index now sits in “Extreme Fear” territory — a stark contrast from the enthusiasm that fueled 2024’s AI-driven rally. Caution is back in the market.
Much of this volatility is global trade-related, specifically around Trump’s new tariffs. Their true impact is still uncertain, making investors nervous. While a quick recovery could reignite optimism, the best buying opportunities aren’t during initial rebounds; they’ve come when fear has driven the masses out of the market.
U.S. and China: Tariffs and Trade Wars
America is staring down a potential trade war as new tariffs from both the U.S. and China escalate tensions. While Trump’s push to bring manufacturing home sounds straightforward, supply chains don’t shift overnight.
It’s an important note that other nations — especially those with less hostility toward the U.S. — could step into roles China previously dominated. Whether that actually unfolds is unclear, but investors should pay close attention to how global supply chains respond in the coming months.
The Fed Balancing Act Continues
Since Trump took office, the Federal Reserve seems to have disappeared from headlines. However, the central bank is still walking a fine line. Inflation has cooled from its peak but hasn’t gone away.
The market is currently pricing in two to three rate cuts in 2025, with the first cut in June according to the CME FedWatch tool.
Employment and Economic Health
Unemployment edged up to 4.2% in March and is still trending in the wrong direction. Trump’s policies aim to address this by bringing manufacturing jobs back to the U.S. — a process known as “reshoring.”
Whether these policies can meaningfully offset lagging wage growth is yet to be seen. One key area to watch is new domestic investment, such as Eli Lilly’s new foundry in Lebanon, Indiana.
Identifying Real Value
Even after recent dips, the S&P 500 remains up over 100% in the past five years. We’re still very close to all-time highs.
Today’s market looks to be at a tipping point. High-performing sectors — particularly tech — could remain stagnant longer than many expect. That doesn’t necessarily signal the end of the bull run — just a pivot from momentum chasing to purposeful investing.
Our opinion is that in 2025, true opportunities will be found in overlooked and undervalued companies. Stick with long-term investing rooted in careful analysis, realistic valuations, and patience, no matter how chaotic the headlines become.
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