Financial markets have been resilient in recent weeks, almost fully recovering from the swings experienced at the beginning of August. Major stock market indices are once again approaching all-time highs, with the S&P 500 gaining 19.2% year-to-date with dividends, less than half of one percent below its peak. This upward trend has been fueled by Fed Chair Powell’s recent speech that laid the groundwork for a September rate cut. The past month is yet another reminder that market volatility is both natural and unavoidable. Rather than fixating on day-to-day market headlines, it’s usually better to invest based on longer-run trends.

With the presidential election just two and a half months away, the candidates’ economic policy platforms are only now beginning to take shape. This late unveiling has some investors concerned about how each policy platform might impact the economy and financial markets.

As with all elections, the perceived stakes are high, and with greater political polarization in recent years, emotions are running as hot as ever. In this challenging environment, what do investors need to know in the months ahead to prevent their political concerns from negatively affecting their financial plans?

Financial markets have felt more fragile recently with investors concerned about the economy, the possibility that the Fed may be behind on cutting rates, and some disappointing tech earnings. Ironically, despite the market volatility last week, major indices were mostly unchanged from Monday to Friday. While they are down from their recent all-time highs, and there is heightened market uncertainty, the S&P 500, Nasdaq, and Dow are still up 13%, 12%, and 6% with dividends this year. This is a reminder that while market swings are never pleasant, looking past short-term volatility is the best way for investors to stay focused on their goals.

As the summer heats up, the stock market is experiencing its own heat wave in the form of rising volatility. Market uncertainty has climbed as investors rotate out of large cap technology stocks and into a broader array of sectors and styles, including small caps. Since their respective peaks in mid-July, the Nasdaq Composite Index has declined 7% and the S&P 500 is down about 4%. Meanwhile, the Russell 2000 index of small cap stocks has jumped over 11% since early July. What’s driving this rotation and how can investors maintain perspective on upcoming events?

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.