James Royal, Ph.D.
9 min read
The S&P 500 stock index is up about 2 percent this year, while the Nasdaq Composite index has risen 1 percent as of early June. A slow but steady year, you might think, if you’d been asleep since the start of 2025. It’s been anything but that, as both indexes took a huge round trip — the S&P 500 sat down more than 15 percent on the year at one point — just to get their heads back above water for the year.
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The cause of that downturn and subsequent rebound? The rollout of President Donald Trump’s tariffs in February and April and the delay of their full implementation. While the stock recovery is nice, higher prices mean that stocks are riskier than they were weeks ago at lower prices, if the facts on the ground are still the same. Some 60 days have already elapsed on a Trump-imposed 90-day pause on the tariffs’ full implementation, with few real deals having been struck with trade partners to avoid the worst of the tariffs. Meanwhile, investors have bid up stocks furiously.
With stocks having rallied hard since April, investors need to be careful, say experts. Here’s what individual investors can do now that stocks look priced for perfection while risks abound.
Learn more: How to build a financial plan for you and your family
Stocks have gone on a round trip to start the year, after being thrown for a loop by the announcement of a range of tariffs on U.S. trading partners. The carnage began in early February, when Trump announced the levies on America’s top three trading partners — Canada, China and Mexico. But markets really plummeted when the Trump administration imposed global tariffs in the double digits on April 2, what the Trump team called Liberation Day.
Markets promptly swooned the following week, until Trump announced a delay in the tariffs. For the moment, that announcement marked the bottom of the market. While stocks aren’t quite at their 52-week highs now, they’re not all that far away, despite huge outstanding risks, such as high stock valuations, an explosive tariff situation and its effects on inflation and interest rates.
“The S&P 500 currently trades at 22 times forward earnings, a historically elevated valuation,” says Corbin Grillo, CFA, director of investment strategy, Linscomb Wealth. “Even if the tariff turmoil subsides, investors have high expectations for corporate performance, raising the risk that companies fail to meet those lofty outlooks.”
If the tariff issue continues to fester, however, it raises the odds that corporate earnings won’t meet these high expectations, potentially hurting stocks, Grillo says.
