Weekly Market Commentary Archives

Aug 18

Mitch Zacks – Weekly Market Commentary: Is This Market Too Hot? The Data Says No.

By BayTrust Financial Weekly Market Commentary

Many investors are looking at the current market rally and wondering if it is sustainable. If you’re a retiree, the concern may run even deeper, as your natural focus is on preserving gains, avoiding major drawdowns, and making sure your portfolio can support long-term income needs.

To put it another way: when stocks move higher in a hurry, it is reasonable to ask whether the market has moved too far, too fast.

The only real way to answer the question is to look at the earnings and economic fundamentals, in my view. Market volatility, which I often remind readers can move stocks in both directions, is driven by sentiment in the short run, but over time, earnings, economic growth, business investment, and consumer demand matter far more. If that’s the criteria we use to evaluate the current market, the rally looks to me like it has fundamental support.

The clearest tailwind is coming from corporate earnings.

Through August 7, 444 S&P 500 companies had reported Q2 results, representing nearly 89% of the index’s membership. For those companies, earnings were up 42.2% from the same period last year on 14.8% higher revenues. That’s not a misprint—42.2% year-over-year earnings growth! The beat rates were also strong, with 82.7% of companies exceeding earnings estimates and 76.4% topping revenue expectations.

Zacks1

To be fair, the headline earnings growth rate is getting a major boost from a few large companies. Alphabet’s Q2 results included a sizable non-operating unrealized gain tied to its SpaceX stake, and companies like Nvidia and Micron continue to have an outsized impact on the Technology sector’s growth rate. But the broader earnings picture still looks constructive even after accounting for that concentration. According to our colleagues at Zacks Investment Research, total S&P 500 earnings are expected to rise 27.1% in 2026. Excluding the Technology sector, earnings are still expected to increase 14.6%—a solid showing that I think speaks to broad economic strength.

The U.S. GDP data tells a similar story. Headline Q2 real GDP growth slowed to 1.5% annualized from 2.1% in Q1, which may seem fairly “muddle-through” for an economic growth rate. But underneath the headline figure, private-sector components were stronger than many appreciate, and I tend to think these data matter more than government spending and imports/exports, for instance.

The private sector components—consumer spending, business investment, and residential investment—grew at a 3.3% annualized pace, the strongest reading in more than three years. Personal consumption expenditures rose 3.2% annualized after increasing just 0.5% in Q1, and durable goods spending climbed 6.8%. Business investment also remained strong, with capital spending up 8.4% annualized after a 10.6% gain in Q1. These are strong prints across the board.

It’s not all big growth and expansion, however. July payrolls fell by -23,000, missing expectations for a gain. But a meaningful part of the July decline appears to have come from local government employment, while private employers still added 30,000 jobs. That is soft, to be sure, but it is not the same as broad labor market deterioration. Monthly jobs data can also be choppy and subject to revision, so the key is whether weakness persists. It’s something to watch in the months ahead.

Bottom Line for Investors

Strong rallies can make investors nervous, especially when they happen quickly and when leadership appears concentrated in a handful of large companies. But I’d argue the current market advance has not been built on sentiment alone.

The data are giving investors a reasonable explanation for the market’s strength. Corporate earnings are growing, revenues are rising, business investment remains healthy, and the economy continues to expand. Earnings expectations continue to move higher, too, which speaks to the corporate outlook.

The AI buildout may be difficult to fully grasp, but it is showing up in real spending, real revenue, and real earnings power. And that’s what matters to stocks.

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¹Zacks.com. August 7, 2026. https://advisor.zacksim.com/e/376582/s-validate-market-fundamentals/5vrgvb/1585478856/h/Qf3MCWDl1bjP_ce9YNWQWZyava0xOf9QAQYDzLhlusQ

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The Nasdaq Composite Index measures all Nasdaq domestic and international based common type stocks listed on The Nasdaq Stock Market. To be eligible for inclusion in the Index, the security’s U.S. listing must be exclusively on The Nasdaq Stock Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing). The security types eligible for the Index include common stocks, ordinary shares, ADRs, shares of beneficial interest or limited partnership interests and tracking stocks. Security types not included in the Index are closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities. An investor cannot invest directly in an index.

The PHLX Semiconductor Sector Index is designed to track the performance of a set of companies engaged in the design, distribution, manufacture, and sale of semiconductors. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Questions posed are for demonstrative and informational purposes only and may not reflect the views of current clients or any one individual.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

Aug 10

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Mitch Zacks – Weekly Market Commentary: What a Hedge Fund Blowup Says About Tech Volatility

By BayTrust Financial Weekly Market Commentary

The past few weeks have marked a volatile stretch for technology stocks—in both directions.

In July, several AI-related sub-sectors like semiconductors, memory, chips, and AI infrastructure came under intense selling pressure. The Philadelphia Semiconductor Index, for instance, nearly entered bear market territory in July, with every member of the index trading below its 50-day moving average.

Readers may have also seen stories on SK Hynix, which embodied the scale of the volatility. The company had just completed a blockbuster Nasdaq debut, raising more than $26 billion. But shares plunged -15% in one day even after a record-breaking earnings report, with operating profit up more than 500% year-over-year. The news stories and accompanying sharp moves in select stocks were head-spinning.¹

Investors were also concerned with Google’s Q2 earnings, which had the company posting its first negative free cash flow period since becoming public. Google remains highly profitable and deeply embedded in the AI race, but the market’s reaction showed that investors are paying closer attention to the cost of staying competitive in AI, not just the potential upside.

Which brings me to the Situational Awareness story. For readers who aren’t familiar, Situational Awareness ‘was’ the hedge fund founded by a former OpenAI researcher with no previous investment experience. The fund reportedly grew from hundreds of millions of dollars to a peak of approximately $45 billion in assets in less than two years, helped by a highly concentrated bet on the AI buildout.

The strategy was characterized as “long hardware, short software,” but it was a case study in the perils of becoming over-concentrated in a hot corner of the market and using leverage to juice the bet. In brief, the fund held sizable long positions in companies tied to AI infrastructure, chips, data centers, and power demand, while shorting software companies viewed as vulnerable to AI disruption. It was a concentrated expression of a view many investors have debated: that AI infrastructure would be the biggest near-term beneficiary of the technology wave, while some incumbent software businesses could face pressure.

But in July, both sides of the trade came under pressure at once. AI-infrastructure longs fell sharply, while some software shorts rallied. That meant the portfolio was not hedged in the way investors might expect from a long/short strategy. The long positions lost money, the short positions also lost money, and leverage turned the reversal into a liquidity event.

What happened next was astonishing. Situational Awareness’ assets fell from a peak of roughly $45 billion to about $10 billion in a matter of weeks. Its portfolio value reportedly declined 67% in July, forcing the fund to sell public equity holdings, eliminate leverage, and retain primarily private investments.

It marked a loud, wild cautionary tale about the risks of trying to predict exactly how the AI story will unfold—and using too much leverage and concentration to make that bet.

The point I want to make in this week’s column is that the Situational Awareness story—and July’s broader tech volatility—was not just about one fund, one company, or one trade. In fact, investors who were not following the day-to-day action closely may have looked at the broader market and assumed conditions were relatively normal. As the chart below shows, comparing the broad Volatility Index (VIX) to the Nasdaq 100 Volatility Index, broader market volatility was contained while volatility in the Nasdaq 100 was running much hotter.

Source: Federal Reserve Bank of St. Louis²

This is where diversification shows its value. Short-term noise can feel overwhelming when investors are concentrated in the part of the market generating the most headlines. But in a broader portfolio, those moves are only one part of the picture. In July, the S&P 500 was roughly flat, while sectors like Energy and Financials posted solid gains. Capital was rotating, not disappearing.

Diversification is not just about reducing exposure to volatility. It is about maintaining exposure to different sources of return when leadership shifts, so that portfolio returns can smooth out over time. Investors do not need every position, sector, or theme to generate blowout returns to make progress toward their long-term goals.

Bottom Line for Investors

The recent volatility in Tech does not negate the long-term opportunity in AI, semiconductors, software, or innovation more broadly. But it does show how difficult it can be to predict which part of a powerful theme will lead next, and it should remind investors how quickly leadership can shift.

For most investors, the goal is not to capture every upside move in the hottest corner of the market. It is to participate in long-term growth while managing the risk of being too dependent on one theme, one trade, or one moment in time. That is where diversification remains so valuable.

References to individual companies are for illustrative purposes only and should not be interpreted as recommendations to buy, sell, or hold any security.

¹Wall Street Journal. July 31, 2026. https://advisor.zacksim.com/e/376582/eness-hedge-fund-imploded-html/5vqmlk/1581299065/h/ILfcWPfeQmsBoYmEmVDhR_dz6nqcAz8KMASdt_zb_YU

² Fred Economic Data. August 5, 2026. https://advisor.zacksim.com/e/376582/series-VIXCLS/5vqmln/1581299065/h/ILfcWPfeQmsBoYmEmVDhR_dz6nqcAz8KMASdt_zb_YU

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Questions posed are for demonstrative and informational purposes only and may not reflect the views of current clients or any one individual.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

Aug 03

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Mitch Zacks – Weekly Market Commentary: Why New Tariffs and War May Not Have Much Market Impact

By BayTrust Financial Weekly Market Commentary

On April 2, 2025 (“Liberation Day”), the Trump administration announced sweeping, ‘reciprocal’ tariffs, and readers likely recall that the initial market reaction was swift and negative. Investors immediately tried to price in worst-case scenarios like higher import costs, pressure on profit margins, slower growth, renewed inflation, and a more complicated path for interest rates.

The conflict involving Iran followed a similar pattern. The initial reaction was sharp, with the S&P 500 nearly reaching correction territory in March. In that instance, investors were pricing-in fears about energy supply, inflation, and higher interest rates.

In both cases, the short-term market reaction was driven by uncertainty, understandably. But we now know that the longer-term response was driven by fundamentals, which remained strong despite these pressures. The S&P 500 rose nearly 18% in 2025 and gained another 10% in the first half of 2026.

The S&P 500 Absorbed Tariff and War Shocks Quickly, Then Continued to Rise (2024 – Present)

Source: Federal Reserve Bank of St. Louis 1

As we enter the second half of 2026, the tariff and war risks are back on the table, with one difference: the market has already spent the past year pricing, testing, and reassessing both risks in real time.

On the tariff side, we’ve seen an additional 50% tariff on a range of Canadian goods, including wine, alcoholic beverages, hockey sticks, cement, and other products. This comes on top of a broader tariff stack that includes duties on Chinese goods, non-USMCA Mexican products, European Union goods, semiconductors, and a proposed tariff (10% – 12.5%) tied to forced-labor concerns across dozens of countries.

I continue to believe that tariffs are not positive for the economy, as they raise costs, create uncertainty for businesses, and can pressure margins for companies with global supply chains or limited pricing power. But they are also no longer a brand-new shock.

When tariffs were first announced in 2025, investors had to consider a wide range of unknowns. Would companies pass the cost on to consumers? Would inflation reaccelerate? Would profit margins compress? Would trade partners retaliate in a way that disrupted global growth?

Investors now know the answers to most of those questions, with the bottom line being that corporate earnings proved more resilient than many feared. The result was not painless, but it also was not the market-breaking event many feared when the policy was first announced.

The renewed conflict involving Iran is similar. It remains a near-term risk because of its potential effects on energy supply, inflation, and interest rates. Earlier this year, investors entered the quarter with oil prices sharply higher and uncertainty surrounding transit through the Strait of Hormuz. But as the quarter progressed, the most severe market assumptions receded. Brent crude fell nearly 40% from its April peak, and oil exports from the Persian Gulf recovered to approximately 60% of their pre-war level.

With the conflict back on, Brent crude is near $90 per barrel, and Gulf transit has become volatile again, with some July days seeing only a fraction of normal vessel traffic through the Strait of Hormuz. While this is not a risk investors should dismiss, the market has seen this pattern before: escalation pushes oil prices higher, inflation expectations rise, bond yields tick higher, and investors reduce expectations for monetary easing. But when energy flows stabilize, much of that pricing can reverse quickly.

The potential consequences of renewed conflict are serious, but the channels through which it affects the economy are increasingly well understood. The same is true for tariffs. Both can still create volatility, but they likely need to worsen, broaden, or surprise markets in a new way to create lasting damage. And I don’t see that happening here.

Bottom Line for Investors

Tariffs and war are not good news, and neither should be ignored. Both can affect prices, margins, interest rates, energy markets, and investor confidence.

But these are no longer entirely new risks. Investors have already seen both issues play out in real time, and the worst-case, long-term market assumptions did not materialize. Volatility remains a distinct possibility, sure. But in my view, unless tariffs or the Iran conflict produce a new and more damaging economic surprise, the more important drivers for investors are still likely to be economic and corporate earnings fundamentals—both of which remain strong.

¹Fred Economic Data. July 28, 2026. https://advisor.zacksim.com/e/376582/series-SP500/5vpynx/1578235974/h/5Zltz33BeMCqHvx_Ik1Tyq9iDVVxJDUEvueQEc0_ENs

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Questions posed are for demonstrative and informational purposes only and may not reflect the views of current clients or any one individual.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

May 30

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Mitch Zacks – Weekly Market Commentary: With Households Feeling Pressure, why is the Stock Market Booming?

By BayTrust Financial Weekly Market Commentary

According to the widely watched University of Michigan Consumer Sentiment Index, Americans are not feeling good about the economy. The index fell to 44.8 in May, down from 49.8 in April, marking the lowest reading in the survey’s history dating back to 1952. That means consumer attitudes are now weaker than they were during the 2008 financial crisis, the pandemic recession, the inflation surge of 2022, and the recessions of the 1970s.¹

And yet the stock market is trading near all-time highs, having rallied off the lows at the start of the Iran conflict. For many investors, it can be puzzling to understand how a disconnect so large can exist.²

The answer, in my view, is simple and has been consistent throughout history: how consumers feel is not always the same as what consumers do.

Even as consumers report having negative feelings about the economy and financial situations, spending has remained quite firm. Retail sales rose 0.5% in April to $757.1 billion—in line with expectations—and following a stronger 1.6% gain in March. Some of the March increase was tied to higher gasoline prices, and there were signs of cooling in categories like furniture, where sales fell 2% in April after rising 2.6% in March. The detailed read on the data does not suggest consumers are retrenching. It suggests they are becoming more selective.

There’s also the matter of the “K-shaped economy” readers may hear about a lot in the news. The premise is that higher-income households continue spending at a healthy pace, supported by wages, asset values, and stronger balance sheets, while lowerincome households are under more pressure from higher prices.

Data from the New York Fed helps illustrate the split. Since early 2023, real retail spending among households earning more than $125,000 has risen about 7.6%, compared with roughly 3% for middle-income households and just over 1% for lowerincome households. That is a meaningful gap, and it explains why some retailers and service providers continue reporting strong demand while others see consumers becoming more cautious. Even still, however, we’re observing that consumers at all income levels are not pulling back entirely. They are trading down, choosing cheaper brands, prioritizing essentials, and looking for value.

The “K-shaped” argument has some merit, but I think its actual impact can be overstated at times. Higher-income households have always represented a large share of total spending, and lower-income consumers have not disappeared from the economy. The story is less about two completely separate economies and more about different degrees of pressure.

As for consumer sentiment surveys, it’s important for investors to remember that these indicators often reflect what households have already experienced, which in this case involves higher prices from 2022-2023, market volatility, political uncertainty, and more recently, gas price spikes. Markets, by contrast, tend to focus on whether economic reality is better or worse than expectations. When expectations are very low, as they are now, the bar for a positive surprise is also very low. It’s an easy hurdle for markets to overcome.

Not only is consumer spending holding up better than the sentiment surveys suggest, we’re also seeing solid business investment activity and of course, near-record earnings growth.

With nearly all S&P 500 companies reporting first-quarter results as I write, about 83% have beaten earnings expectations, which is the highest beat rate since 2021. Earnings strength has also broadened beyond the AI-related technology complex, with Energy, Materials, Industrials, Communication Services, and Consumer Discretionary companies contributing to better-than-expected results. In this context, negative consumer sentiment may actually be a key component of the constructive setup for markets. It’s part of the wall of worry markets love to climb.

Bottom Line for Investors

To be fair, the U.S. consumer is under pressure, especially from high prices in everyday categories. But pressure has not been resulting in retrenchment, at least not to date. Spending remains positive, higher-income households continue to support aggregate demand, and lower-income consumers appear to be adjusting rather than retreating entirely.

For markets, the key question is not whether consumers feel good. It is whether spending, earnings, and investment hold up better than today’s low expectations imply. So far, they have.

1 Wall Street Journal. May 28, 2026. https://www.wsj.com/economy/q1-gross-domestic-product-revisione1a6ff93?mod=economy_lead_story

2 Fred Economic Data. May 28, 2026. https://fred.stlouisfed.org/series/CP

3 MSN. 2026. https://www.msn.com/en-us/money/savingandinvesting/us-companies-shamed-by-trump-tiptoe-into-a-tariff-refundrace/ar-AA23ThNr

4 Wall Street Journal. May 24, 2026. https://www.wsj.com/economy/teen-summer-jobs-f3ffdbfa?mod=economy_lead_pos4

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.

The ICE U.S. Dollar Index measures the value of the U.S. Dollar against a basket of currencies of the top six trading partners of the United States, as measured in 1973: the Euro zone, Japan, the United Kingdom, Canada, Sweden, and Switzerland. An investor cannot directly invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm that acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Dow Jones Industrial Average measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy. An investor cannot directly invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The ICE Exchange-Listed Fixed & Adjustable Rate Preferred Securities Index is a modified market capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The CBOE Volatility Index (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived from real-time, mid-quote prices of S&P 500 Index call and put options. On a global basis, it is one of the most recognized measures of volatility — widely reported by financial media and closely followed by a variety of market participants as a daily market indicator. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index. The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. Index composition is reviewed on an annual basis in December. An investor cannot invest directly in an index.

May 23

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Mitch Zacks – Weekly Market Commentary: What Bank Lending Data Reveals About Risk and Opportunity in Today’s Market

By BayTrust Financial Weekly Market Commentary

Commercial and industrial lending by U.S. banks surged 12.7% in the first quarter, the fastest pace of growth since 2022. I think there are fundamental and regulatory reasons bank lending is growing, which is what I mean by “opportunity” in today’s market. I’ll explain more below.

But the “risk” piece of the equation might be the more insightful part of the story, given that bank lending is growing as private credit is pulling back.¹

Indeed, as bank lending expanded in Q1, private credit lending volumes fell 14% year-over-year. Fundraising for private credit vehicles has also fallen sharply, with new capital raised by non-listed business development companies (BDCs) down roughly 60% from a year ago. Investors also redeemed more than $15 billion from those funds during the quarter, contributing to a meaningful slowdown in new loan activity.

To give readers some background, private credit has become one of the fastest-growing corners of the financial system over the past decade. Private credit funds have filled a gap created by tighter post-financial crisis regulation, which made banks less willing to extend riskier corporate loans. In a relatively short period of time, private credit grew into a roughly $1.8 trillion market and has become an important source of financing for middle-market companies, leveraged buyouts, and private equity-backed transactions.

Yields from private credit vehicles have been attractive to investors in recent years, but these investments typically involve higher fees, less transparency, and more limited liquidity than traditional public securities—as I’ve written before. Shares may only be redeemable at certain intervals, withdrawals can be capped when demand is high, and reported values may not adjust as quickly as public market prices. Many investors who were not fully aware of these terms have been caught off guard recently.

There has been some chatter in financial media that cracks in private credit markets could potentially lead to contagion of some kind, or even a recession. But that’s not an argument I would make right now, especially given the bank lending data I cited above. Commercial banks dwarf the private credit market in size, with U.S. banks currently holding roughly $13.7 trillion in loans outstanding. That’s more than seven times the size of the private credit industry. Even modest increases in bank lending can therefore have a much larger impact on overall credit availability than declines in private lending volumes.

Which brings me to the “opportunity” in today’s market. Banks are benefiting from modest regulatory easing that is allowing them to compete more aggressively for leveraged loans and other corporate financing opportunities. Earlier this year, the Office of the Comptroller of the Currency indicated it was open to relaxing some post-crisis leveraged lending constraints in an effort to help banks regain market share from private lenders.

At the same time, banks may simply be in a stronger position to lend than they were in recent years. A steeper yield curve has improved lending economics, while deposit bases provide banks with cheaper funding than many private credit firms currently enjoy. In March, syndicated bank loans were being issued at spreads roughly 100 basis points lower than comparable private credit loans.

I would argue that this trend, if it holds, is just better for the economy and markets generally. Traditional bank lending generally operates within a more transparent and heavily regulated framework than large portions of the private credit universe. While some worry that easier lending standards could eventually encourage excessive risktaking, the broader takeaway today is that credit continues flowing through the financial system rather than contracting.

Ultimately, it’s credit that helps fund business expansion, acquisitions, capital investment, and hiring. If one corner of the lending market slows while another accelerates, the net economic impact may be far less negative than some of the recent private credit headlines imply. In that sense, what we may be witnessing is less a deterioration in credit conditions and more a shifting balance between private lenders and traditional banks.

Bottom Line for Investors

Companies borrow to expand operations, finance acquisitions, invest in equipment, and hire workers. While we’re seeing a decline in private credit coincide with a pickup in bank lending, that may ultimately be beside the point. Credit availability—not the specific source of the loan—is often the more important driver of future business investment and economic growth.

And right now, the broader lending backdrop still appears constructive. Bank lending is accelerating, corporate default rates remain relatively contained, and businesses continue to access capital despite growing caution in parts of the private credit market.

1 Bloomberg. May 18, 2026. https://finance.yahoo.com/economy/policy/articles/global-bond-yields-multiyear-highs-100607393.html

2 Fred Economic Data. May 20, 2026. https://fred.stlouisfed.org/series/DGS10

3 Goldman Sachs. May 20, 2026. https://www.goldmansachs.com/insights/articles/us-data-center-power-demand-projected-to-doubleby-2027

4 Wall Street Journal. May 20, 2026. https://www.wsj.com/economy/central-banking/fed-minutes-reveal-support-for-rate-hikes-ifinflation-proves-persistent-97e63b1c?mod=economy_lead_story

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.

Zacks Investment Management is an independent Registered Investment Advisory firm that acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

May 16

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Mitch Zacks – Weekly Market Commentary: U.S. Debt Has Crossed Over 100% of GDP. Here’s Our Take on What That Means.

By BayTrust Financial Weekly Market Commentary

The chart below has made the rounds over the past week, as the U.S. national debt has officially surpassed 100% of gross domestic product (GDP). Outside of a brief spike during the pandemic, the U.S. has not ended a fiscal year above the 100% mark since the aftermath of World War II.¹

Investors are understandably concerned. Federal deficits remain historically large, while rising interest rates have increased the cost of servicing that debt. In 2026, the deficit is projected to reach nearly $2 trillion, with roughly one out of every seven taxpayer dollars going toward interest payments.

This is not an issue to be dismissive about, in my view. The long-term fiscal trajectory of the United States is an issue policymakers will eventually need to address, particularly as an aging population places additional pressure on programs like Social Security and Medicare. This comes at a time when political problems have become increasingly difficult to solve.

That all being said, I also think it is important to separate the symbolism of crossing 100% debt-to-GDP from the actual near-term implications for markets and the economy.

One reason is that debt-to-GDP, while widely cited, is an imperfect standalone measure of fiscal stress in the U.S. GDP measures one year of economic output, while federal debt is the cumulative result of borrowing built up over decades. Comparing the two can provide useful context, but it does not necessarily tell us whether a debt burden has become immediately unmanageable.

Market participants rightly focus more closely on the government’s ability to service its debt, particularly the relationship between interest payments and tax receipts. As the chart below shows, interest costs as a share of government revenues have risen meaningfully in recent years. But they also remain below peaks reached during the 1980s and early 1990s, which were periods marked by elevated interest rates and fiscal concerns.

That all being said, I also think it is important to separate the symbolism of crossing 100% debt-to-GDP from the actual near-term implications for markets and the economy.

If we look at this data another way, by comparing annual federal tax receipts (green line, chart below) to annual interest payments on government debt (blue line, chart below), you can see that the government has plenty of means to stay current on debt payments. This is also why markets are not yet treating U.S. debt as a near-term solvency issue.

U.S. equity markets have risen throughout this rapid debt accumulation period, and importantly, the 10-year Treasury yield remains below its long-term historical average. Demand for U.S. Treasurys remains strong globally, supported by the dollar’s role as the world’s reserve currency and the Treasury market’s position at the center of the global financial system. I do not think we’d see this type of reaction from markets if the 100% debt-to-GDP ratio was a meaningful metric.

Bottom Line for Investors

History offers an important perspective. The last time the debt-to-GDP ratio exceeded current levels was in 1946, when debt reached more than 106% of GDP following World War II. That burden eventually declined not because the government aggressively paid down debt, but because economic growth, inflation, and rising productivity allowed the economy to outgrow it over time.

Crossing the 100% debt-to-GDP threshold is therefore best viewed less as an immediate market signal and more as a reminder of a long-term challenge that will eventually require political and economic adjustment. The more relevant questions for investors are whether the U.S. can continue financing its obligations sustainably, whether economic growth remains resilient, and whether markets maintain confidence in the broader system. At least for now, those conditions largely remain in place.

1 Wall Street Journal. May 12, 2026. https://www.wsj.com/economy/cpi-inflation-report-april62b11096?mod=economy_trendingnow_article_pos1

2 Fred Economic Data. March 12, 2026. https://fred.stlouisfed.org/series/CPIAUCSL

3 CNN. March 9, 2026. https://www.cnn.com/2026/05/07/business/tariff-case-ten-percent-trump-courtinternational-trade

4 The NY Times. May 9, 2026. https://www.nytimes.com/2026/05/09/business/china-april-trade-exportsimports.html?unlocked_article_code=1.h1A.ABt5.kCtSBqVRv4uP&smid=url-share

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.

May 09

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Mitch Zacks – Weekly Market Commentary: Fed Holds Rates Steady, but the Real Story is What Happens Next

By BayTrust Financial Weekly Market Commentary

Investors can be forgiven for missing the Federal Reserve’s most recent rate decision, which saw them holding the benchmark fed funds rate at 3.50% to 3.75%. Markets were almost universally expecting a pause, which removed any newsworthiness from the announcement.¹

But that doesn’t mean the meeting was irrelevant.

Parsing through some of the Fed governors’ framings and positionings, it was clear that the Fed’s stance had shifted. In prior months, the debate had centered more on whether inflation was gradually moving back toward target. In the April meeting, the Fed appeared to be emphasizing renewed upside risks, particularly from energy. The “wait-and-see” mindset was more prevalent than it had been in recent meetings.

This distinction is notable as the Fed approaches a leadership transition. Kevin Warsh is poised to take over as Fed Chair in June, and he appears likely to bring a different framework to how the Fed operates, particularly around communication, inflation measurement, and the size of the Fed’s balance sheet. The media swirl around Warsh’s nomination may make it seem like these changes could be disruptive, but I don’t think that’s the case at all.

For starters, the Fed is not a one-person institution. A chair can shape the debate, set the tone, and guide the committee. But monetary policy is still made by a group of governors and regional Fed presidents, many of whom appear reluctant to move quickly while inflation remains above target and energy prices are rising.

That committee structure also helps explain why the more extreme concerns about Fed independence did not come to fruition. There had been worries that the Fed’s institutional structure could be disrupted or that leadership changes could alter the balance of power inside the central bank. None of that happened. Recently, the regional Fed presidents’ terms were extended, high-profile personnel changes did not materialize, and the Fed remains a committee-driven institution. For markets, the uncertainty around these somewhat political issues has all but faded, in my view.

The Fed will probably look more like business as usual, but I do foresee a gradual shift in emphasis. One area where Warsh’s views are especially important is the Fed’s balance sheet. Warsh served as a Fed governor under Ben Bernanke during the 2008 Global Financial Crisis, when the Fed dramatically expanded its use of quantitative easing. Warsh is often associated with the view that the Fed should have emergency balancesheet powers, but that the bar for using them should be high.

The Fed’s balance sheet remains very large, at more than $6 trillion, even after several years of runoff from its pandemic-era peak. Warsh has argued in the past that the Fed’s balance sheet should be smaller, and a Warsh-led Fed may place more emphasis on reducing the central bank’s footprint in Treasury and mortgage markets. In my view, however, Warsh is likely to proceed cautiously. Balance-sheet runoff is a form of liquidity tightening. If the Fed drains reserves too quickly or reduces its holdings too abruptly, it can put upward pressure on longer-duration interest rates. That could create issues for mortgages, corporate borrowing costs, and equity valuations—none of which Warsh will want.

To offset the effects of balance sheet tightening, we may see more coordination with the U.S. Treasury and an effort to push regulatory reforms that allow banks to hold fewer reserves. Adjustments to liquidity requirements or related bank regulations could, in theory, make it easier for the Fed to operate with a smaller balance sheet. This will be the thing to watch during Warsh’s term, in my view.

To be sure, I still think Warsh will make the case for lower interest rates. His argument will likely be that the recent oil shock is a supply-side issue, not evidence of demanddriven inflation. He may also point to improving productivity as a disinflationary force, especially if artificial intelligence and other technologies allow businesses to produce more output with fewer cost pressures. In the 1990s, stronger productivity growth helped the economy grow at a healthy pace without generating the kind of inflation that might otherwise have forced the Fed into a more restrictive stance. If productivity is rising again, which it currently is (see chart below), Warsh may argue that the Fed should not focus only on backward-looking inflation data.

Warsh may be more inclined to look through supply-driven inflation, but the committee may not be ready to do the same. And in my view, that’s not necessarily a negative. If growth remains positive, earnings continue to expand, and inflation does not accelerate materially, stocks do not necessarily need Fed cuts to move higher.

Bottom Line for Investors

The Fed’s decision to pause rate cuts was expected, but the bigger story is the policy environment taking shape for the rest of 2026 and beyond. A Warsh-led Fed may bring a different framework to monetary policy, with more attention paid to productivity, supply-driven inflation, and the size of the Fed’s balance sheet. Worries about collapsing Fed independence or a Fed doing the bidding of the executive branch are overblown, in my view. The Fed remains a committee-driven institution, and many voting members will likely want clearer evidence that inflation is moving back toward target before easing policy.

For investors, the key point right now is that markets appear to have already adjusted to the possibility of no rate cuts this year. That lowers the risk that a prolonged pause becomes a major negative surprise. In my view, the next phase of Fed policy may be less about whether the Fed cuts by 25-basis points, and more about how it manages liquidity, inflation expectations, and the long end of the yield curve.

1 CNBC. April 30, 2026. https://www.cnbc.com/2026/04/30/pce-inflation-rate-march-2026.html

2 Fred Economic Data. 2026.

3 Wall Street Journal. May 4, 2026. https://www.wsj.com/articles/the-great-110-trillion-wealthtransfer-wont-happen-any-time-soon-e8b2ef31

4 Wall Street Journal. May 3, 2026. https://www.wsj.com/economy/global/global-economy-iranenergy-abd8828f?mod=economy_lead_pos4

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm that acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

May 03

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Mitch Zacks – Weekly Market Commentary: Fixed Income Investments Now Offer More Opportunities

By BayTrust Financial Weekly Market Commentary

The first quarter of 2026 brought many interesting developments for bond investors. Renewed inflation concerns pushed yields higher, reversing early gains and leaving the Bloomberg U.S. Aggregate Bond Index slightly negative for the quarter. At the same time, expectations for Federal Reserve rate cuts shifted meaningfully, with the probability of a cut falling to roughly 37%, down from 72% at the end of 2025.

Taken together, these developments drove a notable move in Treasury yields. The 10-year yield rose as high as 4.44% before ending March at 4.32%, while the 2-year climbed to 4.00% before settling near 3.80%.1 Short-term yields rose faster than long-term yields, flattening the curve modestly, though it remains slightly upward sloping (in the chart below, data points above 0 represent an upward sloping yield curve).

While rising yields pressured bond prices, they also improved something largely missing from fixed income for much of the past decade: income. Today’s yields are meaningfully higher than in the post-2010 period, and a larger share of expected returns is now coming from income rather than price appreciation. That shift suggests bonds may once again serve a more traditional role in portfolios, not only as an instrument for reducing overall volatility but also as a source of steady cash flow. In my view, this means investors who have been content with cash (money market) returns in past years may want to give the bond market a closer look. In 2025, broad fixed income returned roughly 7.3%, compared to about 4.3% for cash, marking the first time in several years that bonds meaningfully outperformed. ³ This outperformance reflects both higher starting yields and a gradual steepening in the yield curve, where extending beyond cash is once again being rewarded.

The macro backdrop also appears to be evolving in a way that could support the income story. While headline inflation has moved higher, much of the pressure has been driven by energy prices. Beneath the surface, core inflation remains more contained (2.6% in March), and longer-term expectations have stayed relatively anchored. Meanwhile, we know the labor market is the weak link in the Fed’s inflation/labor mandate. The unemployment rate has risen to approximately 4.3% as of March 2026, up from a 3.4% low in 2023, with hiring trends becoming increasingly uneven. March payrolls rose by +178,000, but in February was revised to -133,000, underscoring volatility in the data.4 If we look more broadly at annual monthly job gains, we can see a stark and steady weakening pattern, which I have argued before likely means a bias towards more cuts in 2026.

For bond investors, this combination is important. Stable underlying inflation helps preserve the real value of income, while signs of a cooling labor market, I think, rule out the possibility of further policy tightening. In practical terms, that means less upward pressure on yields and a more supportive backdrop for bond prices.

Finally, a quick note on the municipal bond market outlook from here. Rising Treasury yields have pushed municipal yields higher as well, improving their relative attractiveness, particularly for investors in higher tax brackets. The yield curve remains slightly upward sloping, and while valuations have not changed dramatically, income levels are more compelling than they were just a few years ago. At the same time, fiscal conditions for state and local governments remain stable, supporting the overall credit backdrop. As a result, municipals continue to serve as a useful tool for tax-efficient income within a diversified fixed income allocation.

Bottom Line for Investors

After years when cash looked unusually competitive and bonds offered limited yield, investors now have more ways to be compensated for taking measured fixed income risk. For investors with cash that is not needed in the near term, but that you still want to treat conservatively, this may be an opportunity to reassess whether staying on the sidelines still offers the best risk/reward tradeoff. Because today’s fixed market offers income that can contribute meaningfully to total return while still playing a stabilizing role in portfolios.

1Wall Street Journal. 2026. https://www.wsj.com/world/middle-east/u-a-e-opec-new-middle-east32ceda56?mod=Searchresults&pos=1&page=1

2 Wall Street Journal. April 30, 2026. https://www.wsj.com/economy/central-banking/u-s-economygrew-at-2-rate-in-first-quarter-6e0c18cc?mod=economy_lead_story

3 Financial Post. April 29, 2026. https://financialpost.com/pmn/business-pmn/us-core-capital-goodsorders-jump-by-most-since-2020

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Any views or opinions expressed may not reflect those of the firm as a whole. Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.

Apr 21

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Mitch Zacks – Weekly Market Commentary: Is Rising Inflation Diminishing Hope for Another Rate Cut?

By BayTrust Financial Weekly Market Commentary

At the start of the year, developed-market central banks like the Fed, the European Central Bank, and the Bank of England were almost uniformly poised to gradually ease rates.

A lot can change in a quarter.

As seen in the chart below, markets have rapidly repriced the monetary policy outlook in response to the conflict in Iran. What started as an expectation for steady rate cuts in 2026 has shifted the expectation for rate hikes.¹

The catalyst behind this repricing is clear. The closure of the Strait of Hormuz has pushed oil and natural gas prices higher, feeding directly into global inflation data. Here in the U.S., March’s Consumer Price Index (CPI) report showed headline inflation rising 3.3% year-over-year, a sharp increase from February’s 2.4% pace, with energy prices up 12.5% and gasoline alone jumping nearly 19%. As seen on the chart below, there’s a sharp divergence in inflation data when it includes energy prices (headline), versus when it’s stripped out (core).

Consumer Price Index, January 2024 – March 2026 (blue line is headline, green line is core)

The gap in the chart seen above is important. While headline inflation jumped, core CPI rose a lesser 2.6% year-over-year, which was slightly below expectations. Food prices were largely flat, and many goods categories showed limited pass-through from higher energy costs. In other words, it’s clear that inflation pressure is not broad-based at this stage.

This is an important distinction when considering monetary policy in the U.S. versus abroad. In Europe and the U.K., central banks operate under more explicitly inflation-focused mandates and economies are more exposed to energy costs. The U.S. jobs market is equally important to the Fed, and our economy is far less exposed, given we’re a net exporter of oil and gas. That’s why I think the market pricing-in Fed hikes in 2026 is premature and likely off-base.

To be sure, a prolonged period of elevated energy prices could justify keeping rates higher for longer, delaying the timing of rate cuts. But despite a meaningful shift in underlying inflation dynamics or expectations, the bar for renewed rate hikes remains high, in my view. In that sense, markets may be interpreting a change in timing as a change in direction. That would make a potential rate cut in 2026 a positive surprise, which I see as a net positive for stocks.

My conviction on this point comes from looking at market-based measures such as 5- and 10-year breakeven rates, which continue to hover in the low-to-mid 2% range. And I’d also cite money supply growth, which has returned to a much more modest pace and is broadly in line with pre-pandemic trends.

5-Year Breakeven Inflation Rate (blue) and 10-Year Breakeven Inflation Rate (green)

Investors should keep in mind that not every inflation spike carries the same policy implications. A rise in headline CPI driven by energy is very different from a broad, demand-led acceleration in prices, and central banks, and especially the Federal Reserve, know that. That is why I think the Fed is more likely to treat the latest inflation data as a reason for caution, not a reason to reverse course. Other developed-market central banks may have less room to look through the shock, but in the U.S., the more likely policy shift is a delay to easing, not the start of a new hiking cycle.

Bottom Line for Investors

Even if markets continue to debate the path of monetary policy, the bigger story for investors may be that the economy appears less dependent on near-term Fed decisions than many assume. S&P 500 earnings are expected to grow to +13.1% in Q1 on +9% higher revenues, with early reports showing +76.6% earnings growth and strong beat rates. Remember that this strength has emerged even as the Fed has taken a relatively limited role in actively supporting growth.

Looking ahead, policy expectations may continue to shift, but underlying drivers of markets like earnings, demand, and corporate fundamentals continue to look strong, regardless of what action central banks take in the near term.

¹J.P. Morgan. March 27, 2026. https://advisor.zacksim.com/e/376582/ll-central-banks-actually-hike/5vc4px/1515207807/h/WRUY0VCH93f7whKO2tPhc2Ju75rCuDaTuRb41p8x9wI

²Fred Economic Data. April 10, 2026. https://advisor.zacksim.com/e/376582/series-CPIAUCSL/5vc4q1/1515207807/h/WRUY0VCH93f7whKO2tPhc2Ju75rCuDaTuRb41p8x9wI

³Fred Economic Data. April 10, 2026. https://advisor.zacksim.com/e/376582/series-EXPINF5YR/5vc4q4/1515207807/h/WRUY0VCH93f7whKO2tPhc2Ju75rCuDaTuRb41p8x9wI

⁴Fred Economic Data. March 24, 2026. https://advisor.zacksim.com/e/376582/series-WM2NS/5vc4q7/1515207807/h/WRUY0VCH93f7whKO2tPhc2Ju75rCuDaTuRb41p8x9wI

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell. The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI ACWI ex U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the U.S. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P Mid Cap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.

The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. An investor cannot directly invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Apr 14

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Mitch Zacks – Weekly Market Commentary: What Headline-Driven Investing Is Really Costing You

By BayTrust Financial Weekly Market Commentary

The U.S. made an announcement on the global stage that sent the media into a tizzy and financial markets into heightened downside volatility. Investors were left guessing what might come next, and how long the uncertainty would last. Was this the beginning of drawn-out tensions on the global stage? Would a recession and/or bear market follow?

I’m not describing the recent escalation in the Middle East. I’m thinking back to almost exactly one year ago, when sweeping tariff announcements triggered a sharp market selloff and a wave of pessimism about global growth. Investors likely remember how sharply the equity markets initially reacted. Global equities fell roughly -11% in a matter of days.

But the reaction didn’t last long, and we didn’t see a bear market or a recession last year. One could argue that 2025 delivered the opposite. The S&P 500 rose nearly +18% in 2025, while the U.S. economy accelerated into the third quarter, finishing the year with modest but positive GDP growth.

What is critical for investors to remember, in my view, is that tariff headlines and trade tensions did not necessarily let up as the year went on. It would be hard to argue that we ever got ‘certainty’ on trade policy in 2025. We didn’t. But markets did not wait for trade deals to be finalized, for tariffs to be rolled back, or for uncertainty to disappear. Stocks adjusted expectations quickly and moved on.

Last year’s tariff case study underscores what I mean by ‘the cost of headline-driven decision making.’ With the current war in Iran, timing the announcement of a two-week cease-fire may have looked like a great trade on paper, but I think the smarter money would have avoided the short-term volatility altogether. As last year’s tariff episode reminds us, markets can remain very choppy in an hour-to-hour news cycle, and it’s easy for investors to get baited into changing course quickly—which can mean failing to fully participate in the longer-term recovery.

In my view, the same dynamic is at play today. Markets are once again being driven by a steady stream of headlines, only this time it’s centered on geopolitical risk, energy supply, and the Strait of Hormuz. Investors are left trying to assess not just what is happening, but how long it will last and what it means for markets.

Equities are responding in real time, but the price action is not as severe as it was last year. It’s also true that the U.S. has fared far better than international markets over the past several weeks. The U.S. is far less exposed to rising energy costs than many of its global peers, given its role as a major oil and natural gas producer. By contrast, regions like Europe remain heavily reliant on imported energy. Estimates suggest that oil and LNG imports account for roughly 1% to 2% of eurozone GDP, compared to a modest positive contribution from net energy exports in the U.S.²

This isn’t a call to favor U.S. over foreign stocks on this headline alone. It is simply a reminder that the economic consequences of a prolonged conflict are unlikely to fall evenly across regions, and that higher energy prices do not automatically translate into broad-based weakness in the U.S. economy.

If last year’s tariff episode taught investors anything, it is that markets do not wait for resolution. They adjust to the range of possible outcomes quickly, and they often move on well before the news flow improves or the uncertainty fully clears. The same may be true here. By the time this conflict feels more settled and the outlook appears clearer, markets may have already done much of their repricing. The two-week cease-fire may hold, and it may not. Investors would be better served looking further out on the horizon, in my view.

Bottom Line for Investors

The real risk in environments like this isn’t the market volatility itself. It’s how investors respond. Periods driven by macro headlines can create the illusion that action is required, whether that means buying into weakness or pulling back until uncertainty fades. But last year’s tariff episode showed how unreliable that instinct can be. The most significant market moves often occur before the news flow improves, not after.

That’s why trying to position around how geopolitical events unfold is rarely productive. It requires getting both the outcome and the timing right, which is simply not possible without a great deal

¹BEA. 2026. https://www.bea.gov/system/files/gdp4q25-2nd-chart-01.png

²Wall Street Journal. April 4, 2026. https://advisor.zacksim.com/e/376582/-mod-economy-feat1-global-pos2/5vbfv7/1508659551/h/9XYSbfdZsg3fDfMt7mtAz1z8jVNLpHqtRgZFJVGJpkg

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.