Volatility has been prevalent this week. Let’s talk about what’s behind it.

The recent market volatility can be attributed to a combination of economic uncertainty, shifting fiscal policies, and fluctuating investor sentiment. Economic indicators such as declining retail sales, falling housing starts, and lower personal savings have raised concerns about consumer spending and overall economic growth. Additionally, an increase in initial jobless claims suggests potential softness in the labor market. The first-quarter GDP is expected to show negative growth, largely driven by a surge in imports, which distorts domestic production figures. While this may not necessarily indicate an imminent recession, it has added to market unease. However, the likelihood of a recession in the near future remains relatively low, estimated at less than 25%.

Adding to this volatility is the market’s reaction to the current administration’s policy implementations. Efforts to reduce government spending, along with anticipated tariff adjustments, have led to both positive and negative reactions in different sectors. Investors are navigating uncertainties surrounding trade, fiscal policy, and economic stimulus measures, resulting in fluctuating stock prices. However, as these policies become more established and their long-term effects become clearer, market volatility is expected to stabilize, particularly in the second half of 2025. Additionally, we anticipate that the Federal Reserve may begin lowering interest rates in the latter half of the year, which could provide further support to economic growth and contribute to a more positive market environment moving forward.

Despite the current volatility, we still anticipate a positive return in the equity markets for 2025, as economic conditions stabilize and policy uncertainties begin to subside.