The past few weeks have been a rollercoaster in the markets, with the S&P 500 dropping 3.10% last week alone. Since reaching a recent high February, the index has declined almost 9%, and some individual stocks—particularly in the growth sector—have been hit much harder.
So, what’s behind the volatility? Right now, investors are reacting to concerns over potential trade conflicts. The Trump administration’s tariff announcements involving Canada, Mexico, and China have raised fears of economic slowdowns, triggering uncertainty in the stock market.
The Political Factor
Many clients have asked about how politics might impact the markets, especially since Republicans have control of the Whitehouse and Congress. Here’s an important consideration: While the recent market pullback has raised concerns about a slowdown, Trump does not want a recession for a pretty simple reason—he has a short window of time before Congress shifts its focus to the midterms. With a divided political climate, any signs of economic weakness will be used as leverage by Democrats to gain seats in the House and Senate. Given the intensity of the last national election, we can expect a lot of dramatic headlines between now and then, many of which could add to market volatility.
The Federal Reserve’s Role
The Federal Reserve still has plenty of tools at its disposal to help stabilize the economy if needed. They are still engaged in Quantitative Tightening, and the Fed Rate remains at a relatively high 4.25%-4.5%. If economic conditions worsen, the Fed has room to adjust policy to support growth. Historically, the Fed has been quick to step in when necessary to prevent a downturn from turning into something more severe. While no one can predict their exact moves, their ability to act remains a key factor in maintaining economic stability.
Key Things to Keep in Mind
Diversification matters. While US stocks have struggled, international markets are holding up well. Outside of the U.S., stocks are up almost 8% this year, and bonds have also posted gains.
We see opportunities. The recent selloff has pushed many high-quality companies to more attractive price levels for long-term investors like us, and we continue to identify ways to adjust portfolios accordingly.
A rebound may not be far off. With the Fed’s ability to step in if needed and international markets showing resilience, long-term investors should stay focused on strategy rather than short-term volatility.
What This Means for You
Market pullbacks like this are normal, and while they create short-term uncertainty, they often present long-term opportunities. Volatility doesn’t necessarily mean a bad year ahead—it just means the ride may be bumpier than usual.
Now is a great time to check in on your portfolio and financial plan. If you have any questions, concerns, or just want to talk through what’s happening, we’re here for you.
Let’s stay focused on your long-term goals, not short-term headlines. Give us a call or email anytime—we’re happy to chat.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a registered investment advisor. Great Valley Group and Paragon Wealth Management are separate entities from LPL.