In general, earnings growth drives stock prices higher. If investors are willing to pay 20 times earnings for a company, and company earnings grow from $5 per share to $6 per share, the stock price will increase from $100 to $120.

“Uncertainty” is the new buzzword. The term has been used repeatedly during earnings calls throughout the past month as company executives described the current state of the operating environment. This uncertainty is driven by the Trump Administration’s fluctuating tariff policy.

Volatility vs Long-Term Trends

Volatility in the market has spiked during the last month, coinciding with the Trump Administration’s tariff rollout. The rollout has been accompanied by shifting levels in the tariff, uncertainty when and where they will be implemented, and an escalating trade war with China. Equities have reacted negatively leading to headlines indicating how far the indexes have fallen off the peak.

The resulting chart can be a little unsettling.