Todd Campbell
6 min read
In This Article:
There has been a lot of chaos this year, which has meant eye-popping volatility for the markets, including stocks, bonds, and currencies.
The past two years were relatively tame compared to this year. The S&P 500 delivered back-to-back gains above 20% in 2023 and 2024, including a robust 24% return last year. This year, sticky inflation, job woes, and an ongoing tussle over tariffs have created uncertainty that's taken the stock market on a roller coaster ride.
To be sure, worries were growing coming into 2025. The jobs market had already weakened enough to cause the Federal Reserve to cut interest rates into the end of 2024, and inflation progress was slowing, providing little help to cash-strapped consumers.
Further, optimism over seemingly never-ending artificial intelligence spending growth had begun to wane, leading many to worry whether the massive run in stocks over the past two years had inflated valuations to unsustainable levels.
In short, the backdrop was already concerning before President Donald Trump took a sledgehammer to global trade, unveiling a series of harsher-than-expected tariffs on key trading partners, including China.
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The result so far from all this chaos has been a whipsawing of markets.
The S&P 500 collapsed from mid-February through early April, falling nearly 20%, just shy of bear market territory. Then, a tariff reprieve in the form of President Trump pausing most reciprocal tariffs on April 9 kicked off a major rally that's erased a lot of the S&P 500's losses.
Now, however, worry is returning following Moody's decision to downgrade the United States' credit rating amid a new spending and tax cuts bill making its way through Congress that would cause the deficit to swell.
The bond market has seen yields rise, and signs could suggest that investors are still too complacent. This point isn't lost on JP Morgan's CEO Jamie Dimon.
Dimon is among the most influential CEOs in America. He commands the largest bank in the U.S. and the fifth largest globally, a role that puts his finger directly on the economy's pulse.
Jamie Dimon, CEO of JPMorgan Chase, has blunt words on the economy, stocks, and credit market.</em>Bloomberg/Getty Images" height="640" loading="eager" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///ywAAAAAAQABAAACAUwAOw==" width="960">
In so-called 'normal' times, a stalled economy can be jump-started by the Federal Reserve's monetary policy.
The Fed is tasked with a dual mandate to ensure low unemployment and inflation. When the economy sputters, it can drop interest rates, increasing economic activity and boosting jobs. When it overheats, it can raise interest rates, decreasing economic activity and reducing inflation.
