Policy Uncertainty and Market Performance
Uncertainty is often viewed as a negative force in financial markets. Periods of geopolitical tension, unclear government policy, or unexpected global events tend to create volatility and investor anxiety. Today’s environment is no exception, with elevated uncertainty driven by international conflict, trade concerns, and shifting political dynamics. One way to measure this is through policy uncertainty indexes, which track how unclear or unpredictable government actions are at a given time. Historically, major spikes in uncertainty have occurred during events such as the aftermath of 9/11, the COVID-19 pandemic, and recent global trade disruptions. Current readings suggest uncertainty levels are once again elevated, approaching some of those past peaks. However, market behavior during these periods may be more surprising than expected. While markets generally prefer stability, historical data shows that periods of high policy uncertainty have often been followed by strong returns across multiple timeframes, including one month, three months, six months, and even twelve months. This suggests that markets may interpret policy-driven disruptions as temporary rather than structural. In many cases, uncertainty creates opportunity, as investors who remain disciplined can benefit from eventual stabilization and recovery. While past performance never guarantees future results, this trend reinforces the importance of maintaining a long-term perspective during volatile periods.
Inflation, Consumer Prices, and What Comes Next
Inflation remains one of the most closely watched economic indicators, directly impacting both consumers and investors. Recent economic data has painted a mixed picture, strong in some areas, yet still uncertain in others. The labor market, for example, has shown resilience. Job growth has exceeded expectations, and wage increases have remained steady, indicating underlying economic strength. However, these figures are inherently backward-looking, reflecting conditions that existed before the most recent geopolitical and economic developments. The more pressing question is how rising costs, particularly energy prices, will ripple through the broader economy. Gas prices, often one of the first visible signs of inflation, play a critical role in determining whether higher costs will spread to other goods and services. This dynamic is closely monitored through the Consumer Price Index (CPI), which measures changes in the price level of a basket of consumer goods and services. The key issue is not just whether prices are rising, but how quickly those increases are being passed on to consumers. Companies may choose to absorb higher costs temporarily, or they may pass them along, impacting inflation readings more directly. The upcoming CPI data will be especially important in determining the trajectory of inflation and, in turn, the direction of interest rates. Policymakers, including the Federal Reserve, will be watching closely as they evaluate whether current pressures are temporary or indicative of a more sustained trend.
Seasonality and the Strength of April
While uncertainty and inflation dominate headlines, historical market trends offer a more optimistic perspective, particularly when it comes to seasonality. Over the long term, the second quarter of the year has consistently delivered strong performance for equities, ranking just behind the fourth quarter. Within that period, April stands out as one of the most reliable months for market gains. Since 1950, April has been positive approximately 70% of the time for the S&P 500, making it the second-best month of the year historically. This pattern suggests that, despite short-term volatility, markets often find footing during this period. Several factors may contribute to this trend, including the inflow of tax refunds, renewed investor activity following the first quarter, and improving economic visibility as the year progresses. While seasonality alone should never drive investment decisions, it can provide a helpful tailwind when combined with other supportive factors. After a volatile start to the year, these historical patterns offer a measure of cautious optimism. If past trends hold, April and the broader second quarter could provide an opportunity for stabilization and potential growth.
Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here
Bobby Norman, CFP®, AIF®, CEPA®
Managing Director
Wealth Consultant
Email Bobby Norman here
Trey Booth, CFA®, AIF®
Chief Investment Officer
Wealth Consultant
Email Trey Booth here
Ty Miller, AIF®
Vice President
Wealth Consultant
Email Ty Miller here
Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.
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