Economy & Markets

February was a volatile month for stocks. Tech continued the selloff that started in late December, with the Magnificent 7 falling 8.1% in the month. Tariffs and inflation fueled worries about growth as the new Trump administration began implementing policy changes.

Recent market swings have highlighted a gap between how investors feel and how markets have performed. As the famous Warren Buffett quote suggests, it has often been wise to be "fearful when others are greedy and greedy when others are fearful.”

January marked a positive but volatile start to the year for investors amid market shifts and policy concerns. President Trump returned to the White House and signed dozens of executive orders, the Chinese artificial intelligence company DeepSeek shook the tech industry, and the Fed hit pause on rate cuts.

Interest rates are fluctuating as investors adjust their expectations around economic growth, Federal Reserve rate moves, and the Trump administration’s policies. The 10-year Treasury yield had risen as high as 4.8% in recent weeks before settling below 4.6%.

The stock market has struggled in recent weeks as concerns have grown around interest rates, market valuations, the direction of the economy, and more. Since the market peak on December 6 last year, the S&P 500 has pulled back 4.3% while the 10-year Treasury yield has climbed from 4.15% to 4.76%.

2024 was a year of unexpectedly strong market performance. Major stock market indices generated historic gains with the S&P 500 returning 25.0% with dividends, the Nasdaq 29.6%, and the Dow Jones Industrial Average 15.0%. This occurred despite concerns around inflation, recessions, Fed policy, and the presidential election.

The 19th century author Balzac wrote that “our worst misfortunes never happen, and most miseries lie in anticipation.”

An important yet counterintuitive issue for investors is that long-term interest rates have risen in recent weeks despite the Fed’s latest cuts. The 10-year U.S. Treasury yield, for instance, has jumped from a low of 3.62% to as high as 4.38%.

With just days to go until the presidential election on November 5, polls suggest it will be a close race between former President Donald Trump and Vice President Kamala Harris. Both candidates are campaigning hard in swing states, and investors may be worried about how either outcome might affect their portfolios.

As we begin the final quarter of the year, financial markets and the economy have defied the expectations of many investors. Rather than falling into recession, the economy has grown steadily, albeit at a slower pace, and inflation rates have fallen toward the Fed’s target.

The conflict between Israel and Hezbollah has escalated in recent days, raising the risk of a full-scale war and marking another chapter in Middle East instability.

Financial markets have been resilient in recent weeks, almost fully recovering from the swings experienced at the beginning of August. Major stock market indices are once again approaching all-time highs, with the S&P 500 gaining 19.2% year-to-date with dividends, less than half of one percent below its peak.