Why This Market Keeps Working Despite Inflation, the Fed, and Geopolitical Risk
By Todd Stankiewicz | CIO, SYKON Capital | Portfolio Manager, Free Markets ETF (FMKT)
The hardest market to invest in is not always the one that is falling. Sometimes it is the one that keeps going up while investors can list a dozen reasons it should not.
Inflation is still sticky. The Fed is not clearly coming to the rescue. Geopolitical risk has moved back into the conversation. Rates remain a pressure point. AI leadership is carrying a lot of weight. And after a strong rally, many investors look at the market and say the same thing: this feels frothy.
I hear that from clients and prospects often. The concern is reasonable. Nobody wants to be the person who adds risk right before a pullback. Nobody wants to chase. Nobody wants to ignore obvious risks.
That is usually where the real work begins, not with predicting the next headline, but with separating a disciplined risk-management decision from an emotional reaction to discomfort.
The question is not whether risks exist. They clearly do. The better question is whether those risks are worse than what investors had already feared.
Risk is often misunderstood as the presence of bad news. In markets, risk is often the gap between what is feared and what actually happens. If investors were positioned for earnings to collapse, inflation to accelerate further, the Fed to become even more restrictive, or geopolitical risk to overwhelm sentiment, then a market can remain resilient even when the headlines still look messy.
That does not mean the market is right. It does not mean the risks do not matter. It means the market may be responding to outcomes that are simply better than feared.
Earnings are a good example. Q1 results were not perfect, but they were far better than the pessimistic setup many investors had coming into the year. LSEG reported that Q1 2026 S&P 500 earnings were expected to grow 29.4% year over year, with 84.2% of reporting companies beating analyst expectations.1 A market that feared an earnings air pocket does not need perfection if earnings come in materially better than expected.
But there is a second side to that point. Better than feared can become harder to beat. The setup has changed. Earlier in the year, companies were being rewarded for clearing a low bar. Now, after stronger earnings and improving expectations, the market may be asking companies to clear a higher one. That does not make the market fragile by itself, but it does mean the margin for disappointment may be smaller.
Inflation is another example. The latest CPI report showed consumer prices rose 0.5% month over month and 4.2% from a year earlier.2 Energy was a major pressure point, rising 3.9% in May and 23.5% over the prior year amid disruption tied to the Iran war.2 That is not the kind of data investors usually celebrate.
And yet price action has not confirmed the most bearish interpretation.
Part of the answer may be that rates have already adjusted. Fed funds futures have repriced meaningfully, with odds of at least one rate hike by year-end above 50%, a quarter-point December hike is at a probability of over 70%, and 2026 cuts largely priced out.6 In other words, the market is not necessarily trading as if the Fed is about to rescue it. It may be trading as if investors have already absorbed a more difficult policy backdrop.
This is where technical analysis becomes useful. Charts do not remove uncertainty, but they can remove some of the emotion from the decision-making process. A chart does not care how uncomfortable the headlines feel. It gives us a framework: are prices above or below important levels? Is the trend intact? Is participation broadening or narrowing? Is leadership still leading?
Right now, the technical picture is mixed but not broken. The S&P 500 recently remained above both its 50-day and 200-day moving averages.4 At the same time, breadth is not overwhelmingly strong, with 56.8% of S&P 500 constituents above their 50-day average and 60.4% above their 200-day average.4 The index has remained resilient, but not everything is participating equally.
The S&P 500 Index Across Time Frames
A daily chart can make recent volatility feel significant. A weekly chart helps show whether the intermediate trend is changing. A monthly chart can put the entire move in context. The point is not to predict every turn, but to avoid letting one time frame dominate the decision. This image represents a candlestick chart of the S&P500 Index across a daily, weekly and monthly time fame.
That is why perspective matters. A daily chart can make volatility feel urgent. A weekly chart can show whether the intermediate trend is still holding. A monthly chart can remind investors whether the bigger picture has actually changed. Time frame can be the difference between reacting emotionally and acting intentionally.
Recent volatility is a good reminder. CNBC pointed to stronger-than-expected jobs data, stretched positioning, and questions around the funding demands of the next stage of the AI cycle as drivers of late-week sentiment changes.5 Those are real issues. They also do not automatically mean the trend has changed.
The behavioral trap is waiting for comfort. Investors want inflation resolved, the Fed clear, earnings strong, geopolitical risk quiet, and valuations easy to defend. The problem is that markets rarely provide that kind of clarity in real time.
By the time investing feels easy, prices may already reflect the comfort.
The answer is not blind optimism. It is discipline. Stay aligned with what is working, question what is weakening, and avoid letting short-term headlines replace a defined process. Use technical levels to manage risk. Respect the trend, but do not ignore breadth. Keep cash intentional, not emotional.
At SYKON, this is why we lean on process. We are not trying to guess every headline. We are trying to understand whether price, trend, breadth, earnings, and risk are moving in the same direction or sending mixed signals. That helps clients stay invested with discipline instead of making emotional decisions at exactly the wrong time.
Markets do not need perfect conditions. They need conditions that are better than feared. For now, that may be enough, but the bar is rising. That is why the next phase will require discipline, not complacency.
If this market has you wondering whether to add risk, reduce risk, or simply stay the course, the better starting point may be your process. Is your cash intentional? Is your equity exposure aligned with your plan? Are your risk controls based on price, trend, and discipline, or on the latest headline? There are risks involved with investing, and investors should consult a professional about their unique situation.
Website FAQ
Why is the market rising despite inflation and geopolitical risk?
Markets often move based on the gap between expectations and reality. If investors expected worse outcomes, then better-than-feared earnings, resilient price trends, or already-repriced Fed expectations can support stocks even when headlines remain messy.
Does a strong market mean risks no longer matter?
No. Inflation, interest rates, geopolitical risk, earnings expectations, and market breadth still matter. The point is that risks need to be evaluated against expectations, positioning, and price action.
Why use technical analysis in this environment?
Technical analysis can help reduce emotional decision-making by focusing on trend, price direction, support, resistance, breadth, and momentum. It does not eliminate uncertainty, but it creates a disciplined framework for assessing whether the market is confirming or rejecting the narrative.
What should investors watch next?
Key areas include Q2 earnings guidance, inflation trends, Fed expectations, market breadth, AI leadership, and whether major indexes continue to hold above important moving averages.
Suggested chart placement for website version: Nasdaq Composite daily, weekly, and monthly chart comparison after the paragraph beginning, "That is why perspective matters."
About Author
Todd Stankiewicz | Chief Investment Officer, SYKON Capital
Todd Stankiewicz is the Chief Investment Officer of SYKON Capital, a fee-based registered investment advisor with offices in Westchester County, NY and Jupiter, FL. He is a recurring guest on Fox Business and the Schwab Network, where he discusses markets, portfolio strategy, and investor behavior. Todd is also the portfolio manager of the Free Markets ETF (FMKT).
Learn more at www.sykoncapital.com
Disclosure
Advisory Services offered through SYKON Capital LLC, a registered investment advisor with the U.S. Securities and Exchange Commission. This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor. The information contained in this presentation has been compiled from third party sources and is believed to be reliable as of the date of this report. Past performance is not indicative of future returns and diversification neither assures a profit nor guarantees against loss in a declining market. Investments involve risk and are not guaranteed.
