When Markets Zig Instead of Zag

If you had stepped away from the markets at the end of March and checked back in today, you might wonder what all the worry was about. After a volatile first quarter marked by aggressive trade policy announcements, stubborn inflation readings, and renewed fears of an economic slowdown, many investors entered the second quarter expecting continued turbulence—or worse. Yet, what we got instead was one of the strongest rallies following a market correction in recent memory.

Between the market low in early April to the end of June, the S&P 500 rebounded by more than 28%, fully recovering its early-year losses and rebounding to new all-time highs. To many, this felt surprising. But to students of the market, this kind of counterintuitive behavior is precisely the point.

Markets Are Notoriously Uncooperative

If there’s a lesson we’re reminded of again and again, it’s that markets don’t move in straight lines, nor do they wait for investors to feel comfortable before advancing. As famed investor Howard Marks put it, “You can’t predict, but you can prepare.”

April provided a perfect case study. Markets stumbled early in the month in response to President Trump’s announcement of a new tariff framework, including sweeping import duties and aggressive rhetoric toward China and global trading partners. This announcement rattled stocks, particularly in technology, consumer goods, and industrials, and briefly reignited fears of a return to 2018-style trade wars.

And yet, the selloff was short-lived.

By mid-April, investors appeared to shrug off the worst-case tariff scenarios, reflecting a growing consensus that while the president often introduces bold trade proposals, he tends to moderate or walk back more extreme measures when economic growth or market stability is at risk. Markets rebounded quickly, aided by improving inflation data and indications that corporate earnings were more resilient than expected.

Behavioral Blind Spots

So why did so few see this coming? In times of uncertainty, the human brain seeks clarity and control—often by anchoring to recent headlines or projecting worst-case scenarios. But markets are not machines—they are complex systems that price in not only what is known, but what is feared, hoped for, and imagined.

This quarter reminds us that market surprises aren’t the exception—they’re the norm. The magnitude of this rally may be larger than normal, but the fact that it caught so many off guard is perfectly typical.

Staying the Course

At NPF Investment Advisors, we encourage clients to build portfolios that are strong enough to withstand uncertainty, rather than clinging to the illusion of certainty. We believe in the power of a disciplined process, diversified allocations, and clear goals that aren’t derailed by short-term volatility or seductive headlines.

The second quarter of 2025 is a powerful reminder that stepping off the roller coaster—even temporarily—can mean missing some of the best days in the market. Historically, missing just the ten best days in any decade can cut total returns dramatically.

As we look to the second half of the year, questions remain. Will the Fed follow through with rate cuts? Will consumer strength hold up? Will the AI investment wave sustain itself? What shape will trade policy actually take if tariffs are reintroduced in 2025?

These are fair questions—but they don’t require perfect answers.

They require perspective, patience, and a plan.

As always, we welcome your questions and look forward to helping you stay grounded in a market that rarely is.

— The NPF Investment Advisors Team