Stock markets erased losses in 2025: Why is it time to be careful?

The S&P 500 stock index has grown by around 2% this year, while the Nasdaq Composite Index rose by 1% in early June. If you’ve been sleeping since the beginning of 2025, you might think it’s a slow and stable year. Both indices made a massive round trip, so nothing else. S&P 500 At one point, I sat over 15% a year – to bring my head back to the water a year.

What caused the economic downturn and subsequent rebound? President Donald Trump’s tariff development in February and April And the delay in their full implementation. Stock recovery is great, but high prices means that stocks are at a lower price than they were weeks ago, if the facts on the ground are still the same. About 60 days have already passed with the full implementation of the 90-day tariffs imposed by Trump, with few actual transactions with trading partners to avoid the worst tariffs. Meanwhile, investors have bid fiercely on the stock.

Experts say that stocks have been rallying since April, so investors need to be careful. With stock prices now appearing to be perfect while risky, here is what an individual investor can do:

The stocks will be gathered due to delays in Trump’s tariffs, but the risk remains

The stocks went back and forth to start the year after being thrown for the loop Various tariff announcements on US trading partners. The massacre began in early February, when Trump announced taxation on Canada, China and Mexico, the top three trading partners in the US. But the market really plummeted when the Trump administration imposed double-digit global tariffs on April 2nd.

The market was immediately disappointed the following week until Trump announced a tariff delay. For now, the announcement marked the bottom of the market. The stock is currently not at a 52-week high, but despite its exceptionally good risks, including a high valuation of the stock, an explosive tariff situation, and impacts on inflation and interest rates, it is not far.

“The S&P 500 is currently trading at revenues prior to 22 times, a historically rising valuation,” said CFA Corbin Grillo, director of investment strategy at Linscomb Wealth. “Even if tariff disruptions subside, investors have high expectations for companies’ performance, increasing the risk that companies will not meet these high-level prospects.”

But as tariff issues continue to arise, it is likely that companies’ revenues do not meet these high expectations, and could damage inventory, Grillo said.

Tariffs are the heart of most of uncertainty and raise questions – how high, how quickly, how quickly, how many countries are there, which are the center of public companies’ performance? There are so many hinges as to how they were resolved, but it’s not clear that even the Trump administration knows they’re going to conclude Bruha that it started.

“The tariff rhetoric has not faded and I think the market is too happy with the potential long-term solutions,” said CFA Edison Byzyka, Chief Investment Officer at Credent Wealth Management.

Tariffs make the Federal Reserve’s job even more difficult as central banks adjust interest rates to balance unemployment and risk of inflation against slowing the economy. However, tariffs could raise inflation even if they hurt jobs, disrupt the Fed’s decision to lower the decision. This tension means the Fed may need to maintain higher fees to combat inflation while jobs and the economy are struggling. If the Fed is wrong and the rates are too early, inflation could start to rise again. This is a scenario that investors don’t want to see.

Investors are monitoring lower fees as they help boost the stock market, but the Fed’s timeline to lower fees continues to be delayed due to tariff uncertainty.

The Fed will remain in “waiting” mode while monitoring the impact of the tariffs, experts say.

According to a survey by the University of Michigan, consumers are hoping for an increase (6.6%) next year. “Reading like this is the most influential sign that the real economy has not yet surpassed the threat of inflation,” says Buzika. “This not only creates additional uncertainty for businesses, but also hinders the Fed’s ability to lower interest rates.”

So, while the tariff issue remains unresolved, stocks are approaching an all-time high, and it is not clear that the Trump administration has a real plan to resolve it in an orderly manner. Some traders shortly refer to what is called the taco trade (Trump always kicked out chickens), but they call the president (and the market) bluff, and they seem to be running a lot of risks to do so.

What should individual investors do in a volatile market?

Market volatility can truly throw individual investors into the loop as they see the value of cash running in days or weeks. It’s hard to see your account balance plummet while your contributions flow into what appears to be trickle in comparison.

Here are some things investors should consider doing in this situation:

Stick to your long-term plan

Experts routinely advise investors who have been around a few years ago who need to tap their accounts to maintain their investment course. If you don’t need to use a retirement account like 401 (k) or IRA Over the next few years, it makes sense to stick to a long-term investment plan.

“Timening the market as an individual investor is a fool’s errand,” says Greg McBride, CFA, Bankrate Chief Financial Analyst. “That’s not the right thing to do. You have to do it twice. You have to do it right about the right time to leave.”

Additionally, if you sell profitable investments in taxable accounts, you will be liable for tax payments. In the meantime, the market could rebound much faster than expected, making you on the sidelines, for example, the emergence of Covid in early 2020 and the situation at tariffs in the past few weeks.

“Many investors who left the stock market during the depths of 2020 have not fully re-entered their positions.

“Look at what happened from early April. It’s a sharp downward draft that cheated in the bare market territory, followed by a 20% rebound in the next eight weeks, and no one would predict or see,” says McBride.

The S&P 500 Stock Index has a long track record of strong returns of around 10% per year over the long term, on average. By earning these returns and investing in S&P 500 index funds, you can surpass 90% or more investors over time, but you need to continue investing.

“Selling out stocks or other assets held for a long-term valuation is often a wrong move,” says Grillo. “The period of market volatility is inevitable. They are the price that investors pay for long-term profits.”

Investors are particularly bad at high purchasing habits when the market feels safe and it feels much more risky, when the market feels safe. Of course, that’s exactly the opposite of what a savvy investor does.

Add it to your account regularly

This does not mean that investors should not do anything at all. It makes sense to continue adding to your investments regularly to have long periods of investors (more times before you have to tap on them). For example, 401(k) investors can continue to make biweekly contributions directly from their pay, avoiding the risk of emotional decision-making.

Consider rebalancing your account investments

Other investors may choose to recalibrate their portfolios if their target allocation moves from bang. Often, that means selling lower bonds and buying more stocks. Those who are still working and adding fresh cash to their accounts can decide to return the stock to add only to the stock position.

Reevaluate your financial plan with a financial advisor

Still, other investors may decide it’s time to truly reevaluate their investment plans. But what this move should not be the case is to make a reactive and post-the-fact decision because of market volatility. Working with a financial advisor will help you make wise decisions that reflect your needs, not just fear.

“If investors’ goals, required returns, or risk tolerances change, it may be appropriate to change the long-term allocation of the portfolio,” says Grillo.

Scan the market for stocks for sale

And for those who want to buy individual stocks and be more conscious when the stock market makes a sale? They may smell the profit When stocks get immersed or enter the bear market. Byzyka believes the market will help with more volatility over the next two or three years, and investors believe they have “immense opportunities” to take advantage of it.

“There is still a wealth of healthy companies with healthy margins to survive the storm,” Byzyka says. However, he emphasizes, “Long-term financial planning is the most important thing to focus on.”

Conclusion

So, while stocks now seem too expensive, that doesn’t necessarily mean that individual investors need to go out and sell. Instead, stick to a long-term buying and holding approach with a diverse portfolio of stocks; S&P 500 index funds, etc.if you can continue riding, it has proven to be a winning strategy that will beat most active investors over time.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Furthermore, investors recommend that past investment products performance is not a guarantee of future price increases.