How to invest in today’s market

Improved corporate earnings expectations lifted the S&P 500 and other major equity markets to new all-time highs in 2025. Despite elevated inflation as tariff costs work through the economy, and some labor market weakness, consumer spending remains solid. Nevertheless, it’s important that investors actively navigate a broad spectrum of opportunities and risks across today’s capital markets.

To achieve better long-term returns, we encourage you to establish a plan, diversify your holdings, and stay invested. Solid economic fundamentals, rising corporate earnings growth, and ongoing policy stimulus present opportunities to capitalize on growth-sensitive and inflation-sensitive assets. However, remain alert to risks such as slower hiring, persistent inflation, tariff uncertainty, and geopolitical tensions.

Long-term investors should create a clear plan to reach financial goals. By building diversified portfolios, you increase your purchasing power over time. Staying invested allows you to benefit from compounding gains, while reacting to headlines or holding excessive cash may cause you to miss significant opportunities.

“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, contextualize current events within scenario frameworks.”

Persistent risks challenge investors to respond decisively

Persistent risks challenge investors to respond decisively. Tax cuts and Federal Reserve rate reductions, combined with strong consumer spending, drive robust economic and corporate earnings growth, despite government shutdowns and tariff uncertainties. Earlier this year, President Trump's tariff announcements shook investor confidence and lowered economic expectations, causing the S&P 500 to fall 12% in four trading days.¹ Trade negotiations and tariff pauses helped the index recover to new highs by late October.

Recent data revisions revealed slower job growth.² The Fed initiated 0.25% rate cuts at its September and October meetings, after a one-year pause, and interest rate markets anticipate three more cuts through 2026. However, some committee members remain cautious about cutting rates further due to elevated inflation. The recently concluded U.S. government shutdown also raises near-term concerns about its impact on economic activity and government’ workers finances.

Constructive consumer activity and solid corporate fundamentals support a “stay invested” approach, even amid persistent negative headlines. The S&P 500 index has rebounded over 33% since the April 8 lows, with a 13% year-to-date gain, demonstrating how capital markets can diverge from the 24-hour news cycle.¹

Meanwhile, rising rate cut expectations have driven bond yields lower, with the 10-year yield dropping to 4.1% in mid-November from a year-to-date high of 4.8%.³  

Bill Merz, head of capital markets research for U.S. Bank Asset Management Group, urges investors to monitor fixed income markets closely. “We view the 10-year Treasury as a cornerstone of capital markets,” says Merz. “Ultimately, the bond market decides how investors are pricing risks of growth and inflation pressures.”

Actively positioning for the environment ahead

To position for the environment ahead, capitalize on opportunities by investing in growth-sensitive and inflation-sensitive assets. Diversifying globally provides broader exposure than the U.S. market alone, accessing faster-growing—though more expensive—stocks alongside cheaper, slower-growing international stocks. Investing in global infrastructure companies taps into earnings and dividend growth, benefits from contract resets as prices rise, and strengthens portfolio diversification. Treasury Inflation Protected Securities (TIPS) can further diversify portfolios if inflation persists.

Over the medium and long term, prioritize diversification. Build your investment portfolio with stocks, high-quality bonds, and real assets as foundational components. Expand stock holdings across geographies and company sizes. Rely on high-quality bonds for stability and income and supplement with smaller allocations to high yield and structured credit for potentially higher returns and risks. Consider adding reinsurance and private capital investments if eligible, as these can offer compelling value.

Haworth observes that many investors fall into “recency bias,” investing in assets that recently performed well. In recent years, strong cash flows fueled outperformance in information technology and communication services stocks, with both sectors in the S&P 500 gaining over 50% in 2023 and more than 35% in 2024. Although these sectors struggled in early 2025, they rebounded in the second and third quarters.⁴

“We see many investors maintaining narrow exposure to domestic, large-cap technology stocks,” says Haworth. “We urge clients to broaden their exposure.”

“Because policies change and uncertainty about consumer and company fundamentals persist, we recommend building a wider mix of assets,” advises Haworth. Tailor your investment choices to your objectives, time horizon, risk appetite, and tax profile.

Connect with your wealth management professional to create a plan tailored to your needs, put your cash to work, and identify ways to enhance your portfolio. If you have questions about the economy, markets, or your finances, your U.S. Bank Wealth Management team stands ready to help.

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.