Wobbling Markets

With uncertainty in the global economy, the stock market’s bull run has come to a screeching halt, sending the price of some of the largest companies in the world down the drain.

Markets have their cycles, and when things stay hot for too long, it doesn’t take a lot of negative sentiment to get momentum moving to the downside.

And to be fair, prices had run rampant. Before tumbling over 20% in a month, Spotify was up over 150% in a year. Palantir went up 5x before dumping 30% this past month. Hims & Hers gained nearly 400% in a year and 180% in two months before settling down.

The largest companies in the world — like Apple, Microsoft, Nvidia, and Meta — have mostly traded sideways for months, even before the recent crash, signifying some concern from investors.

The train must make its stops, and that’s where we’re sitting right now. You can’t keep chugging forward if you run out of fuel.

Or even worse, if something is broken.

It’s hard to say if anything is broken right now. Post-COVID, the economy hasn’t been the same at all. We’ve been battling inflation, high interest rates, unemployment, and now we find ourselves smack-dab in the middle of a tariff war.

President Donald Trump’s willingness to suspend tariffs thus far shows that this is merely a bargaining chip in hopes of getting something out of countries like Canada, Mexico, and China. It may backfire — or it may work out exactly as he hopes. Time will tell, but either way, we will see uncertainty in the markets until good news arises.

Fair or not, the stock market dictates a lot of policy. If people are losing money, the Federal Reserve has its tools. The main lever being interest rates.

Rates have been relatively stagnant for the past 18 months as the Fed chases lower inflation. Rock-bottom rates are part of the reason inflation started running rampant in the first place.

The Fed’s endgame is 2% inflation. We are currently sitting at 3%. This makes it unlikely that the Fed will sharply lower interest rates in hopes of injecting some hot breath into the economy.

The expectation is for the Fed to slowly lower rates over the coming years, and Fed chairman Jerome Powell has never backed down to presidential demands. He won’t help Trump, or any other politician, if he doesn’t feel it’s right for the cause.

We’re in for a wild ride — and a potentially rough year in the stock market. Take advantage of those high-interest savings accounts while you can.