by Kyle Plotkin
Investment Advisor Representative
[email protected]
Stock market volatility has been near the top of everyone’s mind in recent weeks and months. As of Thursday morning, the S&P 500 was sitting with a 6.1% gain year-to-date, with the Nasdaq slightly ahead at 8.3%, and the industrial-heavy Dow at 3.9%. In the big picture, that feels like a pretty decent and reasonable return for mid-June, or about 45% through the year 2026. But the big picture doesn’t tell the whole story.
Markets have pulled back so far in June, and recent headlines have given investors plenty to think about. Inflation remains a concern, the Federal Reserve continues to navigate an uncertain path for interest rates, geopolitical tensions have escalated, oil prices are rising, and questions continue to swirl around corporate earnings and the future of AI spending. Taken together, these developments help explain why markets have become increasingly volatile.
So what exactly is the market trying to sort out? Let’s dig in.
One of the big stories this week has been the May inflation (CPI) report. Consumer prices rose 0.5% in May, pushing the annual inflation rate above 4% for the first time in three years. Energy prices are partially driving the increase due to the supply bottleneck caused by the war in Iran. Energy price increases are particularly impactful because they create downstream effects throughout almost every sector of the economy. What is needed to get any products from point A to point B? Energy. This can have cascading effects on inflation throughout other industries and could make the inflation increase a sticky situation moving forward.
Increased inflation brings up another uncertainty: interest rates. Many analysts are saying that the Fed may have to raise rates in the short term to combat rising inflation, which would increase borrowing costs and potentially slow growth. Consumer spending remains strong but the longer energy prices remain high, the more pressure we’d expect to see on consumers as their discretionary budgets shrink as a result.
In the big picture, the stock market consists of companies, and those companies exist to create profits. In general, if most companies are operating healthily, markets usually go up. One of the questions being asked right now is whether companies will be able to keep investing extremely large amounts of money into developing artificial intelligence and the surrounding infrastructure to support it, particularly data centers and computing power. Investors and analysts are getting concerned about how sustainable these spending patterns are in the long term and whether companies should be reevaluating profit forecasts to account for the huge capital investments that are being made. If future earnings growth forecasts diminish, that could be bad news for the market.
Another concern is that a large portion of stock market growth is currently being driven by a relatively small number of technology and tech-adjacent companies that have been outrunning most other sectors of the market. And because the market indexes are cap-weighted, meaning larger companies make up a larger share of the index itself, struggles in non-tech sectors may be masked by the growth of a small handful of companies. This market breadth concern is another factor contributing to the current uncertainty and volatility.
And yet another layer to the story is the possibility of several large private companies “going public” in the coming years. Companies like SpaceX continue to generate significant investor interest, and a growing wave of mega-IPOs could create additional competition for investor dollars among the existing tech firms. Are the recent tech sector struggles partially a result of investors pulling money from other stocks in preparation of buying into SpaceX? I don’t know, but a lot of analysts seem to be watching.
As you can see, there is no shortage of factors contributing to the current stock market volatility. Inflation affects interest rates. Interest rates affect borrowing costs and company valuations. Energy prices affect inflation. Corporate profits are affected by consumer spending. AI investments represent huge opportunities, but they also carry significant costs in the short term. And all of these factors impact each other, sometimes in ways that are unpredictable.
The reality is that uncertainty is not a new phenomenon. The market has been through rough patches in the past and will continue to experience them in the future. Inflation, wars, technological advancements, interest rate sensitivity, and changing corporate landscapes have existed before. They will continue to exist. One constant has been that, over the long term, markets have continued to rise despite periods of volatility along the way. The path is rarely a straight line, which we’ve experienced directly so far in 2026.
While today’s headlines might feel overwhelming, the market has survived challenges before. Nobody knows the future—our crystal balls are still cloudy—and our goal here at Franklin Retirement Solutions is to help clients navigate uncertainty, maintain perspective, and stay focused on your long-term goals regardless of what the market does next. If you need to talk things through or just calm some shaking nerves, give us a call and set up a time. That’s what we’re here for.