Markets are at an inflection point, caught between economic resilience and deep uncertainty. Volatility has surged, policy shifts are sending mixed signals, and geopolitical realignments are reshaping the global landscape. With Trump’s second term in motion, tariffs, tax cuts, and executive power moves are creating both risk and opportunity.

What does it all mean for investors? This piece dives into the forces driving today’s market turbulence—what’s noise, what’s structural, and how to stay strategically positioned. Plus, a look at February’s market trends and what’s ahead.

The investment landscape is undergoing seismic shifts as the new administration moves at breakneck speed to reshape economic, political, and institutional norms. Policy changes and hundreds of executive orders have heightened uncertainty, prompting investors to rapidly assess risks and opportunities in an environment that changes every day.

A significant expansion of executive power is at the center of debate. As described by the New York Times (9-February 2025), Trump’s policies are not only reshaping trade and regulatory frameworks but challenging long-standing constitutional norms, which could have lasting and far-reaching economic impacts. While supporters applaud an overhaul of inefficient government systems, critics warn of destabilized legal and financial frameworks upon which investors have long relied. Let’s look at some recent actions and the concerns they raise.

The conversation about Bitcoin has taken a dramatic turn, with the Trump administration’s proposed Federal Bitcoin stockpile adding an intriguing—and contentious—dimension to its role in global finance. This initiative raises questions about Bitcoin’s practical and strategic value, and how it could affect investors at all levels.

Bitcoin’s meteoric ascent underscores its growing prominence in global finance. With a 143% gain in 2023, followed by a 121% surge in 2024, it has become impossible to ignore.

As 2024 winds down, the financial markets continue to provide valuable lessons in humility and resilience. This month, we spotlight the “Market Forecasters’ Report Card,” which highlights just how difficult predicting market outcomes can be—and the lessons every investor can take away. Meanwhile, after stumbling in October, global markets roared back in November, led by a nearly 6% surge in the broad U.S. market. Courtesy of analysis by Avantis Investors, we’ll explore these themes through the lens of forecasting missteps and November’s market rally, and what they reveal about the importance of staying disciplined in an unpredictable world.

The recent election of Donald J. Trump marks several milestones in American politics. Trump will be the first American president to serve non-consecutive terms since Grover Cleveland held the office in 1892. He will also be the first to enter office as a felon, convicted on 34 counts of falsifying business records to cover up hush-money payments.

Trump’s return to office, and the sweeping mandate that put him there, signals a disruptive new era in American politics. Voters across the board appear to be disgusted with a “business as usual” approach to issues including immigration and inflation, which surged in the post-Covid years following Trump’s first term. But many questions remain about whether Trump’s policies and leadership (which was, at best, erratic in his first term) will strengthen or erode the U.S. economy.

Is this all the thanks the Fed gets after guiding the economy to a so-called “soft landing?” No sooner did the Fed slash interest rates by half a point and suggest more cuts to come, than investors pushed the yield on the ten-year Treasury to over 4 percent, giving back gains made over the previous three months.

Forget presidential debates, election year politics and all the rest. The question on everyone’s mind right now is, how much will the Fed cut interest rates? You’d think the entire world economy is hanging on the answer. And in a way it is. Has the Fed landed the plane, so to speak, with the proverbial soft landing? Let’s listen to what the pundits are saying.

Low-probability, extreme events are nearly impossible to predict. Markets can’t price them in, and investors can’t hedge against them. Even harder is predicting the proverbial straw that breaks the camel’s back. One day things are fine, and the next day all hell breaks loose.

That’s what happened on August 5. Before U.S. markets opened that day, Japan, South Korea and Taiwan markets went into a steep freefall, dropping 12%, 9% and 8%, respectively. European markets began to crack. Even gold, normally a hedge against financial catastrophe, spiraled downward. The VIX index (“the fear index”) soared to levels not seen since Covid-19 and the 2008 collapse of Lehman Brothers. By the end of the day, the S&P 500 closed with a loss of 3%.

Volatility was back with a vengeance—and a reward for those who held on. Less than two weeks later, the Nasdaq had fully recovered its losses, and the S&P 500 and Dow had reached new single-week highs.

It was a great first half of 2024 for stocks. The S&P 500 reached record territory, climbing about 15% from January through June. Investors were cheered by a slowdown in inflation, disappointed that Fed didn’t begin rate cuts, and dazzled by the glittering potential of AI. The AI chipmaker Nvidia rose an astounding 150% in six months, briefly becoming the most valuable company on the planet.

As November elections draw near, the threat of election interference from Russia and China looms large. Both countries aim to undermine the stability of American democracy by creating confusion among U.S. voters and pushing them toward extreme viewpoints. Such interference could unsettle markets and have far-reaching consequences for high-stakes issues including U.S. fiscal policy, immigration, and foreign policy.