U.S. stock futures swung lower on Monday evening as investors kept a close eye on growing Israel-Iran tensions. President Trump and his advisors are still hoping that these new tariffs will restore American manufacturing to its former glory and save the working-class voter base. These tariffs will actually create revenue. This funding will be used to cover the costs associated with the administration’s announced plan to raise revenues through an ornate Big Beautiful Bill tax cut.
Despite these developments, investors are cautious. In these terms, Brent Schutte of Northwestern Mutual Wealth Management cautioned individuals to not underestimate the impact of Trump’s tariffs. More importantly, he reiterated that it’s early to dismiss the risks presented by the proposed tariffs alongside an economy that’s already starting to show signs of exhaustion.
The Federal Reserve’s rate policy decision, set for Wednesday afternoon, is the biggest event risk on the radar screens of market participants. Investors are particularly keen on how the Fed will respond to ongoing economic indicators, including Tuesday’s anticipated retail sales data for May.
On Monday, the three large cap stock averages closed at their highest. The Dow Jones Industrial Average just jumped by more than 300 points! The S&P 500 notched a gain of about 0.9%, and the tech-heavy Nasdaq Composite jumped by 1.5%. Investor euphoria reached dizzying heights as oil fell from their highs. ICE Brent crude and NYMEX West Texas Intermediate crude futures settled down more than 1% on the day.
Worries about ongoing geopolitical risks, led by the war in Ukraine, started to heavily impact market performance. Iran called on its neighbors—particularly Saudi Arabia and Qatar—to step in. They urged President Trump to use his influence to push Israel into a ceasefire. In a recent post on Truth Social, Trump stated, “everyone should immediately evacuate Tehran.”
U.S. stock futures fell marginally. Investors’ fear is at an all-time high. Historically, total market drawdowns during similar geopolitical events have averaged around -4.6% over approximately -19 days.
Brent Schutte noted that while the ultimate level of tariffs may be less than initially proposed, the administration is unlikely to abandon its belief that tariffs are essential to reshape the global economy and America’s role within it.
Jeff Buchbinder did a great job of providing context around what the market has done after other major disruptions. He remarked, “Recoveries to pre-event levels have taken longer, averaging 40 days, but we’re still talking about an interruption of only a few weeks to a couple of months typically.”
Investors are grappling with massive challenges including tariff impacts and geopolitical war. The next Federal Reserve meeting will be the most important factor in deciding which way the market goes over the next week or two.