To paraphrase Ernest Hemingway, shifts in the stock market often occur “gradually, then suddenly.” Over the past month, the market has rotated from large cap technology stocks to small caps and other sectors. Following the latest jobs report, however, global stocks experienced a sharp pullback due to concerns over the timing of Fed rate cuts, a weakening labor market, and disappointing tech earnings. Financial markets are on edge as investors adjust to a changing economic landscape.

From President Biden’s announcement that he will not be seeking re-election, to a rotation out of tech stocks and into small caps, recent events have added to market uncertainty. The S&P 500 recently declined 2.9% from its all-time high, while the Nasdaq pulled back nearly 5%. It’s natural for investors to be concerned about where the market is headed, especially as the presidential election season heats up and the Fed prepares for its first rate cut this cycle. However, history shows that it’s important for investors to stay focused on the long run and not overreact to every news headline. More than ever, staying levelheaded is the best way to achieve long-term financial goals.

The stock market has continued its historic rally with the S&P 500 gaining 19% year-to-date with reinvested dividends, contributing to a total return of 61% since the market bottom in 2022. While much of this performance has been driven by large cap technology stocks over the past 18 months, there are now signs that other parts of the market are benefiting as well.

These shifts highlight the important fact that while investing trends may come and go, it’s the tried-and-true principles of investing that help investors grow their portfolios and achieve their financial goals over years and decades. What should investors know about diversifying across sectors and styles over the next several quarters?

As we enter the second half of the year, it’s important for long-term investors to maintain perspective on the major events that have driven markets. Despite ongoing economic uncertainty, the stock market has experienced a strong rally as investors anticipate the first Fed rate cut and the rally in artificial intelligence stocks continues.

As the presidential debate season kicks off, the current and former presidents’ divergent approaches to taxes will be on display. Naturally, this is a controversial topic fueled by strong political views on our nation’s priorities, government spending, entitlement programs, fairness around taxation, and much more. While taxes affect all parts of our financial lives, their impact on the stock market is not what many might guess. As the rhetoric from both sides of the aisle heats up, how can investors stay level-headed and stick to their long-term financial plans?