What’s Next After a Volatile Week in the Markets?

• Fears about slowing growth and uncertainty about tariff policy are stoking volatility and sending stocks lower.
• Bonds have gained ground as investors seek safety in fixed income, while international markets continue outperforming.
• Strategists expect volatility to persist and encourage investors to focus on fundamentals and keep a long-term view in mind.

Investors are being treated to a wild ride, as fears around slowing growth, sticky inflation, and a weakening economic outlook collide with rapidly changing developments in US trade policy. The result is a stock market struggling for direction. The past week saw stocks falling on Monday and Tuesday, regaining ground on Wednesday, sliding again on Thursday, and finding a small bounce on Friday.

The Morningstar US Market Index ended the week down 3.27%. Growth stocks saw even more painful declines, falling 4.91% over the week as tech titans like Nvidia NVDA and Tesla TSLA pulled back. Value stocks fared better with losses of 2.16%. Since the start of the year, stocks have fallen roughly 2.5%, erasing all gains made since President Trump’s victory in the US election in November.

Analysts say stocks will likely keep gyrating until US trade policy becomes more certain. “The market would love to see this back and forth on tariffs stop,” says Steve Sosnick, chief strategist at Interactive Brokers. “Companies in the market could deal with pretty much most outcomes. It’s just a question of what [those outcomes are]. Markets hate uncertainty, and we’ve got nothing but uncertainty on the tariff front.” Combine that with an uncertain outlook for inflation and Federal Reserve policy, and you have a recipe for a stock market in wait-and-see mode.

Bonds Regain Ground

As stocks churn, the bond market has rallied as investors seek safety in risk-off assets. The yield on the 10-year Treasury note has fallen to 4.28% from its peak of 4.8% in mid-January. Bond prices move in the opposite direction of yields.

“We’re moving away from focusing entirely on inflation, and now there are concerns about the growth outlook,” explains Blake Gwinn, head of US rates strategy at RBC Capital Markets. That’s fueling a return to the classic negative correlation between stocks and bonds. Morningstar funds reporter Gabe Alpert recently explored how bonds have outperformed equities over the past few weeks. […]

— Read More: www.morningstar.com