What Just Happened in the Markets—And What Might Come Next

If you’ve felt like the stock market was giving you whiplash this spring, you’re not alone. Between dramatic policy headlines, sudden rallies, and “what now?” inflation chatter, investors have had plenty to chew on—and even more to second-guess. Despite all the drama, we’ve landed in a surprisingly stable spot. The not-so-good news? It might not last.

Let’s unpack what’s going on, why it matters, and what smart investors should be thinking about as we head into the second half of the year.

Tariff Talk Turned Market Mayhem

It started with a policy one-two punch: early-year excitement over potential fiscal stimulus and deregulation, followed abruptly by sharp anxiety over the administration’s proposed triple-digit tariffs. These weren’t just idle threats. Investors feared tariffs could fuel inflation while choking off economic growth—a toxic combo known as stagflation (yes, that dreaded “S” word).

Markets didn’t take it well. The S&P 500 dropped nearly20%, and Treasury yields spiked, signaling stress not just in stocks but across the financial system. Even the boldest investors started to get cold feet.

But then—just as the selloff was reaching a crescendo—came the “Tariff Time-Out” (TTO). Announced April 8, the pause in tariff escalation halted the slide almost instantly. In fact, markets rebounded hard, with the S&P 500 rising 12% by the end of April. A brief reprieve, or something more lasting?

Geopolitical Shockwaves: Israel, Iran, and Market Reactions

While markets have processed a lot this year, one potential source of volatility is heating up fast: the escalating conflict between Israel and Iran. As with past geopolitical flare-ups, the market often reacts quickly, then recalibrates just as fast. Albeit highly unlikely, should the U.S. becomes militarily involved, we could see oil prices spike again, Treasury yields fall, and safe-haven assets like gold and the dollar rally.  For long-term investors, this isn’t a reason to panic, it’s an opportunity to lean into discipline, tune out the headlines, and stick to a strategy designed to weather the unpredictable.

A Rally Built on Relief (and Maybe a Bit of FOMO)

Once the TTO hit, things moved fast. April’s losses vanished by month’s end. Then May brought more gains—6.3%, to be exact. By May 31, the S&P 500 had clawed its way back to just above where it started the year. After everything? Flat.

But don’t let that lull you into thinking it’s all sunshine and index funds. This rally felt more like a sigh of relief than a full-throttle bull market.

Still, market breadth—the number of stocks rising together—improved significantly. More names hit new 20-day highs, and a greater percentage traded above their 50- and 200-day moving averages. That’s a good sign. It suggests this rebound wasn’t just about a few mega caps dragging the index higher. The whole market began to hum.

So, What Now? A Fork in the Road

Heading into summer, investors face a set of familiar but thorny questions:

• Will tariffs come back with a vengeance?

  
  

• Could renewed policy threats kill the rebound?

  
  

• Or is the economy strong enough to weather more noise?

Our current stance? Cautiously optimistic, with a side of realism.

Let’s break it down:

• Fundamentals: Neutral to positive. Earnings and GDP growth are encouraging. Inflation is cooling. Check, check, and check.

  
  

• Valuation: Also neutral. The overall market trades around 22x earnings, but the equal-weighted S&P 500 is at a more reasonable 17x. So while some of the big-name “Mag 7” stocks are expensive, the average stock isn’t crazy overvalued.

  
  

• Technical Metrics: Improving. Momentum is better, breadth is broader, and investor sentiment—still a bit gloomy—could actually be a contrarian bullish signal.

In other words, things aren’t perfect, but they’re not nearly as fragile as they felt a couple months ago.

Staying Smart Without Standing Still

Here’s where the rubber meets the road.

Holding steady doesn’t mean doing nothing. And balance doesn’t mean boring.

If you’re all-in on tech, maybe it’s time to rebalance. The “Mag 7” stocks surged back after underperforming during the April selloff—but that swing just proves how volatile and risky concentrated bets can be.

If you’ve been avoiding international stocks? You might want to reconsider. U.S. large-cap dominance has been a defining trend, but tides turn. Diversification isn’t a buzzword—it’s protection against overconfidence.

And if you panicked in April and are now feeling overextended after the bounce? That’s telling. It might be time to reassess your risk tolerance—not just in theory, but in practice.

Talk to your advisor. Ask yourself hard questions. This market isn’t just about numbers—it’s about knowing what kind of ride you can handle.

Looking Ahead: The Crystal Ball, Slightly Smudged

Our formal second-half “Crystal Ball” forecast drops in July. For now, the base case still calls for double-digit returns over the next12 months. That said, we’re trimming the probability a bit and widening the range of expected outcomes. Not a pivot—just a reality check.

Because here’s the thing: Volatility is the price of admission for long-term gains. If you’re waiting for perfect clarity, you’ll likely miss the move.

Markets don’t ring bells at bottoms. They don’t send invitations to the next rally. They just... move. Often faster than you’re comfortable with.

Final Thought: Don’t Mistake Calm for Certainty

The past few months have been a masterclass in investor emotion. Fear gave way to relief. Relief bred momentum. And now? We’re back to watching, waiting, guessing.

But here’s a quiet truth: you don’t have to predict the future to build wealth. You just have to stay grounded, stay diversified, and keep your cool when the headlines get loud.

So take a breath. Revisit your strategy. And stay tuned—because the second half of this year? It’s likely to be just as eventful as the first.

And probably twice as noisy.