Markets have been on a roller coaster, and investors are asking:¹

Is a bear market on the way?

 

Let’s dive into what’s happening and what it might mean for your portfolio.

What’s driving these market swings?

In a word: uncertainty.

Anxiety over a potential trade war is causing a significant shift in business sentiment, with many corporate leaders bracing for a potential recession later this year.²

It’s a dramatic (and concerning) change from the outlook just a few months ago.

Three key worries seem to be driving markets:

1. Tariff uncertainty is causing anxiety – Analysts are concerned that widespread tariffs could increase costs and disrupt many industries.

However, recent remarks from the administration hint at a more flexible approach to negotiations that could blunt the full impact of tariffs.³

2. Sticky inflation persists – Many economists don’t expect us to hit the Fed’s 2% target until 2026 or later.²

If inflation doesn’t moderate, the Fed may get cold feet about lowering interest rates further.

3. Consumer spending is slowing – Fresh data shows Americans are tightening their belts as inflation and economic worries bite.⁴

Since consumer spending drives nearly 70% of the economy, this pullback raises real concerns.

Are there potential bright spots despite the noise?

The recent market bounce tells us something important: investors are ready to respond positively to policy clarity.

The push to strengthen domestic production could also unlock new opportunities in some sectors of the economy.

Our job is to spot those opportunities and stay nimble enough to use them when they emerge.

What could this mean for your portfolio?

Market volatility can be unsettling, especially alongside economic uncertainty. It’s perfectly normal to feel concerned when headlines turn gloomy.

We don’t know what will happen next, but I know this: Emotional reactions to market movements often lead to missed opportunities.

If you’re worried about what’s going on, please reach out—our role is to be your guide, thought partner, and a source of reassurance and perspective.

Your investment strategy was designed to account for market fluctuations.

 

Sources:

1. https://www.cnbc.com/2025/03/24/stock-market-today-live-updates.html

2. https://www.cnbc.com/2025/03/25/recession-is-coming-pessimistic-corporate-cfos-say-cnbc-survey.html

3. https://www.cnbc.com/2025/03/25/cnbc-daily-open-trump-winks-at-gentler-tariffs-boosting-markets.html

4. https://www.reuters.com/world/us/us-consumers-slow-spending-inflation-bites-synchrony-says-2025-03-25/

After reaching new record highs in recent weeks, markets plunged on worries that cheaper AI competition from China could pose risks to U.S. tech companies.¹

What caused the market reaction?

Let’s dive in.

What caused the tech market crash?

Much of the market run-up over the last two years has been driven by AI mania, with U.S. companies leading the charge.

However, this narrative faced a test when DeepSeek, a Chinese tech startup, released an advanced (much cheaper) AI model.

DeepSeek claims it was able to develop its advanced model for just $6 million using fewer hard-to-find computer chips, compared to the hundreds of billions collectively invested by U.S. rivals to develop their own AI models.¹

If the buzz around DeepSeek R&D numbers turns out to be more than just hype, it raises questions about the efficiency and competitiveness of U.S.-based AI firms.

Why are AI models so expensive to train?

That is the trillion-dollar question.

The rising costs of AI development have been a key focus for investors.

Capital spending on AI model development is soaring, driven by the cost of the massive computing power needed to analyze data.²

The chart below shows the estimated costs to train some of the major models released over the last few years.

One major tech CEO estimated that training advanced AI models could cost anywhere from $10 billion to $100 billion.³

In contrast, DeepSeek claims to have developed its model for a fraction of the cost by using innovative ways to process data using fewer resources.

If their approach is validated, it shows that there may be alternative paths to AI innovation that require less upfront investment.

What will this AI “space race” mean for U.S. AI companies?

While the long-term potential for AI could be massive, it’s still a very new technology with a rapidly evolving landscape and not a lot of return to show for substantial investments.⁴

If DeepSeek’s approach can be replicated, the disruption could benefit the sector by making it faster and cheaper to release new models.

The new pressure would also force competitors to become more efficient in their operations.

Will the tech selloff trigger a bear market?

Market adjustments like this are not unusual, particularly after periods of strong performance.

Stocks have been riding high on soaring tech firm valuations, and the pullback could be the reset the sector needs to return to Earth.

Looking ahead, we can expect more volatility as investors adjust expectations and digest new data.

Bear markets are always a risk, and it’s wise to stay flexible and be prepared for one to strike.

That said, we see plenty of growth opportunities ahead despite the short-term uncertainty.

As always, we’re watching closely and monitoring trends.

 

Sources

1. CNBC, 2025 [URL: https://www.cnbc.com/2025/01/27/how-the-buzz-around-chinese-ai-model-deepseek-sparked-a-massive-nasdaq-sell-off.html]

2. Stanford, 2024 [URL: https://aiindex.stanford.edu/wp-content/uploads/2024/05/HAI_AI-Index-Report-2024.pdf]

3. IBD, 2024 [URL: https://www.investors.com/news/technology/ai-stocks-openai-artificial-intelligence-models-big-tech-google-meta/]

4. Goldman Sachs, 2024 [URL: https://www.goldmansachs.com/images/migrated/insights/pages/gs-research/gen-ai–too-much-spend,-too-little-benefit-/TOM_AI 2.0_ForRedaction.pdf]

Chart sources:

Stanford, 2024 [URL: https://aiindex.stanford.edu/wp-content/uploads/2024/05/HAI_AI-Index-Report-2024.pdf]

CNN, 2025 [URL: https://www.cnn.com/2025/01/27/tech/deepseek-stocks-ai-china/index.html]

Now that the election is over, what will the new administration prioritize in the new year?

Here are a few things we’re watching in the months ahead:

The debt ceiling debate may reignite in early 2025.

The debt ceiling, the cap on the total amount of debt the U.S. can hold, has been suspended as part of a deal made in the last Congressional fight.¹

When the cap returns in January, it may kick off a fresh round of debates and draw attention to the more than $35 trillion the U.S. holds in debt.²

Will lawmakers take action to stem deficit spending? Or will they continue to kick the can down the road?

We’ll have to wait and see.

Tax cuts may be extended past 2025.

A number of popular individual and small business tax breaks are scheduled to expire at the end of 2025, which would trigger higher individual income tax rates and increase estate taxes.³

President-elect Trump may extend or make some or all of these provisions permanent as part of his 2025 priorities.

However, tax cuts lead to lost revenue for the federal government, which would end up adding to the national debt.

It’s hard to know how lawmakers will square these competing priorities, but we’re keeping a close eye on it and will keep you informed.

Tariffs could become a key issue for businesses.

The new administration has announced plans for broad tariffs on imports, especially on goods from China.⁴

Tariffs can impact inflation and business earnings by increasing the cost of goods and supplies from overseas.

If trading partners respond by adding their own tariffs on U.S. goods, it could hurt overseas demand by making our products more expensive.

How deep or broad those tariffs could be is a big source of uncertainty going into the new year.

However, it’s likely that any new policies would come with many rounds of debate, so the actual impact of tariffs may be much less than the worst-case scenarios.

We’ll keep you updated.

Markets may become volatile with uncertainty.

While the uncertainty of the election has faded, new uncertainty around policy priorities has replaced it.

We’re expecting volatility ahead as analysts digest reports and adjust their positions ahead of the new year.

Investors are also watching data for hints about where the economy is headed next.

The bull market is now over two years old. Should we be worried that a bear market is around the corner?

Probably not.

The chart below shows you the average age of recent bull markets.

While the past doesn’t predict the future, we can see that two years isn’t historically long for a bull market. In fact, the longest bull market on record lasted more than 12 years.⁵

A sudden turn to a bear market is not likely at this point.

On the other hand, there are a lot of risks in this environment that could shake things up.

If geopolitical issues flare, inflation rebounds, or the business environment starts to look dicey, we can expect markets to correct.

 

Sources:

1. https://bipartisanpolicy.org/blog/debt-limit-2025-treasury-cash-on-hand/

2. https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/

3. https://tax.thomsonreuters.com/blog/what-to-know-about-tcja-expiration/

4. https://www.yahoo.com/news/trumps-proposed-tariffs-raise-prices-205300785.html

5. https://www.hartfordfunds.com/practice-management/client-conversations/investing-for-growth/10-things-you-should-know-about-bull-markets.html

Chart sources: https://finance.yahoo.com/news/the-bull-market-is-2-years-old-heres-where-wall-street-thinks-stocks-go-next-100050648.html?guccounter=1

*Current bull market as of 11/20/24

The bull market has officially turned two.

Markets have also had an impressive run since the bottom of the bear market.

Since October 12, 2022, the S&P 500 has gained over 60%.¹

Can the bulls keep running?

Given the strong performance in 2023 and the strong 2024 we’re having, it’s reasonable to worry that markets might retreat.

You can see in the chart below that consecutive strong years have happened before.²

That said, past performance doesn’t guarantee that optimists will continue to drive markets.

In fact, it wouldn’t be a surprise to see a pullback ahead.

However, there’s reason to hope for continued optimism.

The bull run we’ve experienced this year has a strong grounding in economic factors.

Factor #1: A growing economy generally boosts markets.

While markets are often impacted by short-term trends and investor psychology, stocks generally follow the economy.

The latest data shows that economists are upbeat about where economic growth is headed.³

Since the stock market is forward-looking, that’s a positive for the bulls.

Factor #2: The Federal Reserve’s interest rate policy is loosening.

A big part of the market story this year is the hope that the Fed will be able to lower interest rates without causing inflation to spike or tipping the economy into recession.

Lower interest rates are generally positive for markets because they make it cheaper for firms and consumers to borrow money.

Lower corporate borrowing costs can fuel growth, R&D, acquisitions, and other capital-intensive projects that boost stock prices.

Factor #3: Optimism about corporate earnings.

While earnings season is still underway, the general consensus is that corporate earnings are looking solid so far.⁴

That’s great news for markets.

A recent survey of corporate leaders also found that the majority expect company profits to increase.⁵

Taken together, that’s a positive for the bulls.

However, there are a number of risks we’re watching.

With markets regularly testing new highs, stock valuations are also high.

That means some stocks may be overvalued.

If investors lose optimism about growth, markets will likely retreat.

Uncertainty surrounding American politics and global geopolitics is also high.

While elections and conflicts generally don’t have long-term effects on markets, they can certainly trigger selloffs.⁶

Overall, we’re still cautiously optimistic about where markets are going in the final months of the year.

It can be tempting to look at market highs and decide to sell and stand on the sidelines.

However, timing markets perfectly is impossible and you risk missing out on future growth.

 

Sources

1. https://finance.yahoo.com/news/the-bull-market-is-2-years-old-heres-where-wall-street-thinks-stocks-go-next-100050648.html

2. https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

3. https://www.wsj.com/economy/economists-predictions-survey-charts-68ba82d6?mod=article_inline

4. https://www.nasdaq.com/articles/stocks-edge-higher-solid-corporate-earnings-boost-market-optimism

5. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/survey-results-expectations-for-company-performance-by-industry

6. https://www.nytimes.com/2024/10/15/business/stock-market-valuation-outlook.html

Chart sources: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

A lot has happened recently.

After weeks of gains, markets slid as investors took a step back from big technology stocks.¹

At the same time, a global IT outage took major corporations offline across the world.

President Joe Biden withdrew from the election, injecting more uncertainty into the tight race.²

A shooter came close to assassinating Donald Trump at a campaign rally.³

What could all this mean for investors? Let’s discuss.

Crowdstrike, a global IT outsourcing company, took millions of Windows devices offline with a bad update.

Despite causing hours and days of chaos for airlines, banks, hospitals, and other companies, the economic impact of the outage is likely to be muted.⁴

However, it shows just how interconnected and fragile our technology infrastructure can be.

Markets bounced back quickly from the tech-triggered slide.²

It’s pretty common for markets to recover from a slide when overall sentiment or fundamentals haven’t shifted

In this case, the quick correction was mostly concentrated in the tech sector and was related to investors shifting their positions away from some of the sector’s biggest winners.

Let’s use this as a teachable moment:

One of the challenges of being a long-term investor is accepting down days and weeks. 

Investors who panic and sell miss out on the strong market days that often follow.

While markets rebounded back quickly this time, that’s not guaranteed.

We’re expecting markets to remain volatile as investors position themselves ahead of major earnings reports and economic data.

What could a new Democratic presidential candidate mean for investors?

In the short term, extra uncertainty around the election could stoke volatility as traders revisit their bets.

However, in the medium to long term, the election isn’t likely to have much impact on markets at all – despite what the headlines might tell you.

Here’s a quick look at how the S&P 500 performed when each party held the White House.

As you can see, markets grew regardless of which party held the presidency.⁵

And – markets did better with a divided Congress.

That’s likely because a legislative branch split between parties makes it harder to pass new tax laws or other legislation that could affect business performance.

Bottom line: market fundamentals haven’t significantly changed but we expect more volatility ahead.

We’re watching the market and economic data closely and we’ll keep you informed along the way.

 

Sources:

1. https://finance.yahoo.com/news/asian-stocks-track-us-decline-224153088.html

2. https://finance.yahoo.com/news/stock-market-news-today-tech-roars-back-as-sp-500-nasdaq-surge-ahead-of-earnings-200038261.html

3. https://www.cnn.com/2024/07/23/politics/pennsylvania-state-police-commissioner-reveals-stunning-info-about-trump-shooting/index.html

4. https://www.usatoday.com/story/money/investing/2024/07/19/us-stocks-uninterrupted-crowdstrike-outage/74469633007/

5. https://get.ycharts.com/resources/blog/an-advisors-guide-to-elections-and-the-markets/

Chart sources: https://get.ycharts.com/resources/blog/an-advisors-guide-to-elections-and-the-markets/