How to invest in today’s market

Investing in today’s market: stay invested while you navigate opportunity and risk

Improving corporate earnings expectations pushed the S&P 500 and other major equity markets to new all-time highs in 2025. ¹ Inflation remains elevated as tariff costs work through the economy, and the labor market has shown some weakness, ² yet consumer spending continues to hold up. ³ In this environment, investors can still pursue meaningful long-term progress – but they benefit most when they pair optimism with discipline and a clear plan.

A practical way to pursue better long-term results is to commit to a plan, diversify across asset types, and stay invested through changing headlines. Solid economic fundamentals, rising corporate earnings growth, and ongoing policy stimulus create opportunities across equities, fixed income, and real assets. At the same time, investors should remain alert to slower hiring, persistent inflation, tariff uncertainty, and geopolitical tensions that can quickly reshape market leadership.

Markets can move faster than the news cycle

Long-term investors rarely win by reacting to every headline, especially when markets often diverge from the 24-hour news cycle. “You can’t always position your portfolio for the daily news cycle,” says Rob Haworth, senior investment strategy director for U.S. Bank Asset Management Group. “Instead, evaluate current events within the broader context of economic and market trends.”

That perspective matters because markets have already shown how quickly sentiment can shift when investors see a path through uncertainty. Tax cuts and Federal Reserve rate reductions, combined with solid consumer spending, have supported robust economic and corporate earnings growth—even as tariff uncertainty, geopolitical events, and a government shutdown complicated the outlook. In one striking example, President Trump's tariff announcements shook confidence and contributed to a 12% S&P 500 decline in four trading days, before markets recovered and ultimately pushed back toward new highs in January 2026. ¹

Constructive consumer activity and solid corporate fundamentals continue to support a “stay invested” posture, even amid persistent negative headlines. The S&P 500 rebounded more than 38% from the April 8 lows, reinforcing how quickly markets can recover when risk appetite improves. ¹ Investors who keep a longer horizon can use those episodes as reminders to focus on process—plan, diversify, and rebalance—rather than trying to predict every turn.

The Fed is cutting, but inflation shapes the path

Recent data revisions pointed to slower job growth, and the Fed responded by initiating 0.25% interest rate cuts at its final three meetings in 2025, following a one-year pause. Interest rate markets are now pricing in expectations for two additional Fed rate cuts in 2026, although some committee members remain cautious because inflation is still elevated. The recently concluded U.S. government shutdown adds another near-term variable, particularly around how interruptions to activity and government workers’ finances might ripple through demand.

Bond yields have already reacted to that policy shift and to evolving expectations for 2026. The 10-year yield settled in around 4.25% in January, down from a 2025 high of 4.8%. ⁴ Bill Merz, head of capital markets research for U.S. Bank Asset Management Group, emphasizes why this matters: “We view the 10-year Treasury as a barometer of investor attitudes and appetites,” he says. “Ultimately, the bond market decides how investors are pricing risks of growth and inflation pressures.”

Diversify across regions, styles, and return drivers

To position for the environment ahead, investors can build portfolios that participate in growth while also respecting inflation risk. Diversifying globally can widen opportunity sets beyond the U.S. market alone by pairing faster-growing—though often more expensive—stocks with cheaper, slower-growing international markets. Adding global infrastructure can also broaden diversification by tapping into earnings and dividend growth potential and by benefiting from contract resets as prices rise.

Over the medium and long term, a diversified foundation often starts with stocks, high-quality bonds, and real assets. Investors can expand stock exposure across geographies and company sizes, use high-quality bonds for stability and income, and complement those holdings with smaller allocations to higher-yielding segments—recognizing that higher return potential typically brings higher risk. For eligible investors, reinsurance and private capital offer additional return sources within a broader portfolio framework.

Diversification also helps counter “recency bias,” the tendency to chase what has already done well. Strong cash flows recently fueled outperformance in information technology and communication services, with both sectors gaining over 50% in 2023 and more than 35% in 2024, then rebounding after a weaker start to 2025. ⁵ “We see many investors maintaining narrow exposure to domestic, large-cap information technology stocks” says Rob Haworth. “We urge clients to broaden their exposure both within the U.S. market and to include foreign equities as well.”

Even with a well-constructed portfolio, investors still benefit from tailoring choices to objectives, time horizon, risk appetite, and tax profile. “Because policies change and uncertainty about consumer and company fundamentals persist, we recommend building a wider mix of assets,” advises Rob Haworth. If you have questions about the economy, markets, or your finances, the article reiterates that your U.S. Bank Wealth Management team stands ready to help you create a plan, put cash to work, and identify ways to enhance your portfolio.

Note: Tax-loss harvesting does not apply to tax-advantaged accounts such as traditional, Roth and SEP IRAs, 401(k) and 529 plans. Private equity investments provide investors and funds the potential to invest directly into private companies or participate in buyouts of public companies that result in a delisting of the public equity. Investors considering an investment in private equity must be fully aware that these investments are illiquid by nature, typically represent a long-term binding commitment and are not readily marketable. The valuation procedures for these holdings are often subjective in nature. Private debt investments may be either direct or indirect and are subject to significant risks, including the possibility of default, limited liquidity and the infrequent availability of independent credit ratings for private companies. Structured products are subject to market risk and/or principal loss if sold prior to maturity or if the issuer defaults on the security. Investors should request and review copies of Structured Products Pricing Supplements and Prospectuses prior to approving or directing an investment in these securities. Investments in high yield bonds offer the potential for high current income and attractive total return but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer's ability to make principal and interest payments. Derivatives can be illiquid, may disproportionately increase losses and may have a potentially large negative impact on performance. Employing leverage may result in increased volatility. These investments are designed for investors who understand and are willing to accept these risks. Reinsurance allocations made to insurance-linked securities (ILS) are financial instruments whose performance is determined by insurance loss events primarily driven by weather-related and other natural catastrophes (such as hurricanes and earthquakes). These events are typically low-frequency but high-severity occurrences. In exchange for higher potential yields, investors assume the risk of a disaster during the life of their bonds, with their principal used to cover damage caused if the catastrophe is severe enough. The Standard & Poor’s 500 Index (S&P 500) consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The S&P 500 is an unmanaged index of stocks. It is not possible to invest directly in the index. Diversification and asset allocation do not guarantee returns or protect against losses. Past performance is no guarantee of future results.

FAQs

How should I invest in the market today?

With recent events and major policy changes—such as higher tariffs and new tax policies—investors can prepare by owning a broad mix of assets. Include international exposure in your equity portfolio and diversify your fixed income holdings beyond U.S. Treasury securities. Always consult your wealth management professional to identify the investment strategy that best aligns with your goals and risk tolerance.

How do I invest in the current stock market?

Technology-oriented stocks drove market performance in 2023 and 2024, fueled by investor enthusiasm for artificial intelligence. Early in 2025, technology stocks lagged behind, while U.S. mid-cap and overseas stocks outperformed U.S. large caps. However, technology stocks regained their leadership in 2025.⁵ The outlook for 2026 remains optimistic, though unique circumstances—such as expanded tariffs from the Trump administration and the recent government shutdown—add uncertainty. To offset market volatility, consider dollar-cost averaging and broaden your portfolio with global diversification to capture opportunities in other economies.

What are the risks of investing in today’s market?

Markets can be unpredictable in the short term, with temporary fluctuations. Position your assets to meet long-term goals and be ready to weather short-term swings. One key concern is whether consumers can maintain strong spending, which fuels economic growth—especially as interest rates and inflation remain elevated. Businesses are also evaluating how consumers will respond to price increases from new tariffs on imported goods and how these tariffs will affect their bottom lines and supply chains. Consult your financial professional to assess your risk tolerance and ensure your long-term assets are positioned appropriately.