Policy-induced uncertainty creates market volatility

“There are decades where nothing happens, and there are weeks where decades happen.”

This quote, often attributed to Vladimir Lenin during the Bolshevik Revolution, feels especially relevant today as global and domestic events unfold at an astonishing pace. While its historical origins are complex, the sentiment remains clear — markets, consumers and investors are facing rapid shifts with wide-reaching consequences.

Consumer Confidence Sags

The new administration’s first few weeks have been marked by a flurry of geopolitical and economic initiatives, ranging from proposed territorial acquisitions to an evolving tariff strategy that changes almost daily. Tariffs have been imposed, delayed, adjusted and sometimes reintroduced with little clarity on their long-term impact. As a result, even seasoned economists are struggling to assess how these shifts will affect the U.S. economy.
Perhaps the most concerning development is the potential impact on consumer confidence. On Friday, the University of Michigan’s Consumer Sentiment Index for February dropped nearly 10%, reflecting fears over inflation and job market uncertainty, particularly among federal employees affected by the latest policy moves. The retail sector is already feeling the strain, with Walmart revising its 2025 revenue and earnings forecasts downward due to growing consumer uncertainty around inflation.

For years, the strength of the U.S. consumer has been a stabilizing force in the economy. Now cracks are beginning to show, raising questions about how spending patterns may shift in the months ahead.

Topsy Turvey Week for Stocks…

Despite making new all-time highs on Wednesday last week, the S&P 500 had two sharply negative sessions, finishing the week down 1.7%. The Dow Jones Industrial Average lost roughly 1,200 points in two days, closing the week lower by 2.5%, while the technology-laden Nasdaq index registered a similar weekly decline (Source: CNBC).

…But Bonds Stage a Rally

At least fixed-income investors were rewarded with sharply higher bond prices as Treasury yields declined by about 10 basis points across all maturities. The bond market is anticipating that the flurry of measures proposed by the new administration could negatively impact the U.S. economy in the second half of 2025.

A Stark Reminder of Stock Risk

For investors watching the markets closely, this week provided a sobering reminder of the risks associated with equity ownership – as well as the value of a well-diversified portfolio. Noted examples include:

• Walmart stock dropped nearly 10% in just two days, erasing approximately $70 billion in market value, after adjusting its financial guidance for 2025.
• Axon, which makes police body cameras, tumbled 27% on the week after ending a key vendor partnership.
• UnitedHealth opened down nearly 12% on Friday, wiping out $45 billion in valuation, following reports that the Justice Department is investigating its Medicare billing practices.

At Elevage Partners, we believe that a well-diversified portfolio is the best defense against market volatility and company-specific risks. While equity investing has historically delivered strong long-term returns, concentrated positions can expose investors to outsized losses. By maintaining broad diversification across asset classes, sectors, and geographies, we help our clients manage risk while staying positioned for growth.

Looking Ahead: Key Market Events

With volatility running high, investors will be watching several key developments this week:

• Nvidia earnings report – Wednesday: A crucial test for the tech sector, with implications for AI-driven market momentum.
• Personal Consumption Expenditures (PCE) inflation report – Friday: The Fed’s preferred inflation gauge will provide insight into price pressures and potential monetary policy shifts.

The coming weeks will test how resilient markets and consumers really are, as shifts in economic data and corporate earnings could drive sudden and possibly exaggerated swings. The Investment Committee at Elevage Partners has navigated unpredictable environments before, and our approach remains the same: Staying focused on long-term fundamentals, managing risk with discipline and positioning portfolios to weather volatility while capturing opportunities as they arise.

---

The information contained herein represents the views of Elevage Partners at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein In addition, there can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Any statement non-factual in nature constitutes only current opinion which is subject to change. These materials are provided for informational purposes only and do not constitute investment advice. Any reference to a security listed herein does not constitute a recommendation to buy, sell, or hold such security. Past performance is no guarantee of future results. The historical returns of any securities and/or sectors mentioned in this commentary are not necessarily indicative of their future performance.