Typically, there is a central theme for investors that drives their decisions. Most of the time that is a focus on economic growth leading to this chain reaction:
More GDP Growth > More Earnings Growth > More Share Price Growth
Conversely fears of a slowing growth will lead to serious pullbacks and corrections and even a bear market in time if it the odds of a recession greatly increase.
So, what is the central theme now for investors?
That is not 100% clear and will be the focus of this week’s Reitmeister Total Return commentary.
Market Outlook
In the above intro I talked about economics as being the usual focus of investors. However, going back the past couple years it has been much more about inflation and what the Fed will do next.
That certainly was the case throughout 2024 as investors hung on every word and facial tick from Fed officials. Yet, this central focus on the Fed has taken a back seat in 2025 as I believe the market has shifted to a focus on new plans from the Trump administration.
More on that topic in a moment, but first I want to drive home the point that inflation has been far too hot of late. Truly that has been the case for several months as the inflation rate did not really budge lower. Gladly for a while it wasn’t going higher either...giving the Fed officials enough ammo to lower the Fed funds rate by 100 basis points.
Unfortunately, on 2/12 we found out that CPI went higher on both core and regular readings. Even worse was seeing the 0.5% month over month rise in total inflation which if it stayed in place speaks of a 6% annual pace...far above the 2% Fed target.
Things did not look much better the next day for PPI which came in at +0.4% month over month which is a still too hot 5% annual pace.
Add this altogether and only an insane person sees a Fed rate cut coming 3/19...not even 5/7 makes any sense given these signals. The 6/18 meeting has a bit more movement at 44% expectation of another cut...but I think that is wishful thinking at this time.
The key point with all this is that the S&P 500 (SPY) marched right back up above 6,100 flirting with the all time highs on this news. Meaning that inflation and the Fed is most certainly not the key focus any more.
What has taken inflation & the Fed’s place for investors?
Earlier in January I would have said tariffs. But that catalyst is fading too as shared in my last commentary: Investors in “Wait and See” Mode.
The central theme is that the Trump administration is seen as pro-business. This is a fair statement given Trump’s first administration 2017-2021 where he often cited the height of the S&P 500 as a key metric of his success.
Combine this with investors becoming more accustomed to Trump’s negotiation style on tariffs means that they are not taking the bait on every bad headline. As we often see a softening of his stance is often right around the corner.
On top of that there is still the hopes for lowered corporate taxes which is a terrific catalyst for stocks.
Adding the 2 together makes it hard to sell off stocks at this time...but also makes it hard for them to move substantially higher. For now that seems to equate to a tight trading range between 6,000 and the highs of 6,129.
That is too little space for the market to operate in for long. Thus, we will bust out in one direction or the other at some time soon.
Tariff talks devolve into all out trade war = break below the range.
Tariff talks become more reasonable + a catalyst like lower corporate taxes = break above the range.
Note that a third scenario is that we just get used to noisy headlines while the economy continues to track higher. In that case we don’t break higher as much as we melt higher drip by drip...next thing you know we are at 6,200 and ready for more.
Yes, this seems to create a tricky environment for stock investing given the myriad of potential outcomes. However, when you are inside a long term bull market...then best to act like that will continue.
Meaning to stay primarily long the stock market. Just be sure to do that with the best stocks. My favorite of which are shared in the section that follows...
What To Do Next?
Check out my portfolio with hand selected picks for the current market environment:
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If you are curious to learn more, and want to see my current 10 recommendations, then please click the link below to get started now.
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Wishing you a world of investment success!
SPY shares were trading at $611.49 per share on Tuesday afternoon, up $1.79 (+0.29%). Year-to-date, SPY has gained 4.34%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
Trump or the Fed More Important to Stock Investors? StockNews.com
