Three months ago, very few analysts, traders, or investors would have predicted that the markets would be poised to make yet another new high—but here we are. The roller coaster has climbed back to the very top of its previous range as we enter July.
Let’s Recap the Past 3 Months:
These past three months have been filled with dramatic news and volatile market activity.
April 2 was what the Trump administration referred to as “Liberation Day.” Trade tariffs tanked the markets for nearly two weeks, only stabilizing after a series of negotiated pauses. These pauses—intended for future negotiations—came as the administration began a sweeping overhaul of the U.S. taxation and trade systems. What quickly became apparent was that much of this was a negotiation tactic. After all, President Donald Trump did write a book many years ago titled “The Art of the Deal”. April saw markets drop to key support levels, but once temporary deals were struck, the markets began to form a bottom.
In May, the news cycle was dominated by escalating tensions between Israel and Iran. Israel launched attacks on Iran’s nuclear facilities, prompting Iranian retaliation. The United States was then drawn into the conflict, launching strikes of its own on Iran’s nuclear infrastructure. Eventually, a tentative peace deal was reached, and a cease-fire was established, bringing a sense of calm that helped lift markets back toward new highs.
A Technical Perspective
However, from a technical perspective, it’s important to remind readers that volatility accompanying a shallow new high is not bullish market behavior. In fact, it often signals a market in distribution. Accumulation typically occurs in consolidating markets with low volatility. What we’re seeing now is a high-volatility environment with a broad trading range—clear signs of uncertainty. So, while we may be near a new high, that doesn’t mean all is well in the world—or in the markets.
$GLD the Gold ETF seems to be in an accumulation pattern in the midst of a bullish uptrend.
Troubling Signs
There are troubling signs pointing to cracks in the broader economy. The threat of stagflation has reemerged. In recent years, inflation was the main concern, though it was offset by strong and steady economic growth. But recent developments suggest the economy may begin to stagnate even as inflationary pressures persist—raising the specter of that dreaded word: stagflation. Additional warning signs, such as a slowdown—or even reversal—in real estate prices, could stoke recession fears. As home values decline, people may start to feel poorer. Some key markets, like Florida, have already seen housing prices begin to fall.
In summary: New market highs can be a great time for investors to consider taking profits and freeing up capital for future opportunities. It’s wise for both traders and investors to review their portfolios and strategies as we enter the summer doldrums. Caution—and cash on hand—might just be the name of the game this season.
Trade wisely.
Written by Michael DiGioia, Director of Education
Mike is available for One-on-One Coaching. Learn More
