Why This Market Doesn't Scare Easily (Yet)
From wars and tariffs to deficits and slowing data, markets keep marching higher. Here’s why the fear hasn’t kicked in—and what would finally change that.
Since mid-April, the S&P 500 has been climbing higher—even as the news cycle churns out one risk after another.
Geopolitical escalation. Tariff threats. A worsening fiscal outlook. Signs of economic slowdown.
These are real risks. But the market’s reaction? Mostly a shrug.
So what’s driving this disconnect? And more importantly—what should we watch for that could actually change the market’s mind?
Let’s walk through it.
📍 Risk #1: Israel vs. Iran Escalation
Israel launched a direct strike on Iran’s nuclear infrastructure and military leadership. This effectively kicks off a de facto war—an outcome global powers have tried to prevent for more than a decade.
Why hasn’t the market reacted?
Iran’s military strength is already diminished. Years of sanctions and targeted strikes have eroded its ability to escalate meaningfully.
Iran isn’t a major oil supplier. Sanctions have kept them off the main stage. OPEC spare capacity, especially from Saudi Arabia, helps cushion any oil disruption risk.
What to watch:
If the conflict spreads or oil prices spike and stay elevated, markets will care. This becomes a headline that matters only if it hits energy supply or draws in U.S. forces.
📍 Risk #2: Tariff Tensions Rising (Again)
The July 9 deadline on reciprocal tariffs is approaching, and there’s no shortage of rhetoric out of Washington. The risk? Higher tariffs on major trading partners, fueling inflation and weighing on global growth.
Why is the market ignoring it?
One word: TACO — Trump Always Chickens Out
Markets now treat tariff threats like background noise. Investors assume either the threats are empty, or that any action won’t last. Remember when I said markets will start ignoring the Trump Tape Bombs?
What to watch:
If TACO proves false—meaning actual tariffs are raised and stick—expect volatility. Until then, markets will keep tuning it out.
📍 Risk #3: U.S. Debt and Deficit Spiral
The fiscal outlook continues to deteriorate. Proposals to extend tax cuts and boost spending are gaining ground, with no serious offsets.
This is the kind of setup that led to the UK’s “Truss moment”—a bond market revolt in response to fiscal recklessness.
Why isn’t the market panicking?
Because the 10-year Treasury yield isn’t. For all the concern in headlines, the bond market isn’t flashing red.
What to watch:
If the 10-year breaks meaningfully above 5%, that’s the moment to worry. Higher yields = rising concern. That’s when deficits become today’s problem, not tomorrow’s.
📍 Risk #4: Economic Slowdown Brewing
Soft data is stacking up:
Jobless claims creeping higher
PMIs stuck below 50
Payroll growth decelerating
This makes sense—rates are still high, and tariff/policy uncertainty lingers.
Why is Wall Street so calm?
Because the slowdown hasn’t gotten bad enough. Investors still remember underestimating the economy’s vulnerability during COVID and the rate hike cycle. Until we see a sharp deterioration, the assumption is: soft landing.
What to watch:
If we get a trifecta of:
ISM PMIs below 50
Jobless claims >260k
Negative job growth
Then economic concerns move to center stage—fast.
Final Takeaway
Markets are ignoring these headlines because they haven’t triggered immediate economic or liquidity stress.
But that’s not the same as saying the risk isn’t real. It just hasn’t hit yet.
And remember - The one fact pertaining to all conditions is that they will change.
Feel free to use me as a sounding board.
Best regards,
-Kurt
Schedule a call with me by clicking HERE
Kurt S. Altrichter, CRPS®
Fiduciary Advisor | President
Great analysis. So far we haven't fallen off the tightrope.