It’s been an unusual year—to say the least—for investment markets. After rising earlier in the year, both stocks and bonds in the U.S. have dropped in recent weeks. Market leaders like Apple and Nvidia have been among the hardest hit. The U.S. dollar has also dropped, helping boost the value of international shares, and gold has continued to hit new all-time highs, despite inflation cooling.

What can we learn from all this? I see several lessons.

There are no guarantees. After the November election, the expectation was that the second Trump administration would look a lot like the first, when tax cuts and other policies boosted share prices. With this as the consensus expectation, markets rose after the election and continued to rise into the early months of this year.

But those expectations missed the mark. While tariff increases were expected, they’ve been much more significant—and thus more damaging—than anyone expected. And with the White House, Senate and House all aligned politically, the expectation was that Washington would move quickly to extend the tax cuts that are set to expire at the end of this year. Not only has that legislation moved slowly, but now there’s news that Republicans are considering raising rates on some taxpayers, imposing a new, higher bracket on those earning over $1 million.

These policy shifts are a reminder that, even when everyone seems to agree, things can change. That’s why I believe it’s best to never go too far out on a limb with investment choices. Nothing is guaranteed.

Economics is not a science. The challenge with economics is that it’s only sometimes right. It’s more reliable than astrology, but it’s not chemistry or physics either. In economics, sometimes things go according to the textbook, but sometimes they don’t. And in any given situation, there’s no way to know which way they’ll go.

Consider what we’ve seen this year. Owing to the trade war, the stock market has dropped. That makes sense. But the bond market’s reaction has run contrary to expectations. Usually, when investors become fearful, they seek out the safe haven of the bond market, and especially the security traditionally offered by U.S. Treasurys. But that’s not what we’re seeing now. Treasury bond prices have dropped. And because interest rates are the flip side of bond prices, we’ve seen interest rates rise, making life more expensive for everyone from car buyers to home purchasers. That’s added to the environment of uncertainty and is definitely not what standard economics would have predicted.

Bad news isn’t the worst thing. Bad news definitely doesn’t help stock prices. But this year, we’ve seen something even worse: Uncertainty, as it turns out, is often the worst thing for stock prices. When it isn’t clear where the economy is headed, some number of investors will choose to sell and to sit on the sidelines until there’s resolution. That can lead to a prolonged period of malaise. In contrast, with bad news, the market tends to adjust and then to move forward.

The flip side though, is that markets can rise quickly when clarity returns. We saw an example of that last Wednesday when the White House announced that certain tariffs would be delayed by 90 days. The S&P 500 rose nearly 10% that day, its best day in more than 15 years. We’re still not out of the woods, though, and until there is clarity, uncertainty will continue to be a day-to-day drag on markets.

The stock market is—ultimately—rational. Benjamin Graham, the father of investment analysis, explained the stock market’s seemingly irrational behavior with an analogy: In the short term, he said, the market is like a voting machine, but in the long term, it’s a weighing machine. Stock prices in other words, often overreact in the short term, but as things settle down, stock prices tend to more accurately reflect corporate profits, as they should. This idea seems particularly applicable right now.

Even if the new tariff policies put a dent in corporate profits, that damage is likely to be temporary. Over time, companies will find ways to adjust and to grow in the future. That’s another reason I believe it’s best to stay invested despite the recent stream of bad news. If we believe that corporate profits will be higher five and 10 years from now, then that is what matters, and that is what should give us the confidence to look beyond today’s news.

Even policymakers don’t know where policy is headed. Last fall, after the election but before the inauguration, the incoming Treasury secretary, Scott Bessent, gave an interview and shared his thoughts on tariffs. Seeking to calm those worried about the potentially inflationary impact of tariffs, he offered some back-of-the-envelope math to illustrate why consumers shouldn’t worry. In his example, he assumed a 10% tariff rate. In reality, the administration is planning tariffs in excess of 100% on some countries, especially China. As investors, it’s helpful to monitor developments, but we should never put too much stock in the opinions even of policymakers.

The Fed’s control is more limited than it may seem. The Federal Reserve is a bit of an opaque institution. I’ll never forget the cab driver who spent the entire ride sharing with me his favorite conspiracy theories about the Fed. In simple terms, though, one of the Fed’s key roles is to set interest rates. When the economy is flagging, it lowers rates to encourage economic activity, and when things are running too hot and inflation rises, the Fed lifts rates to cool things down.

But as we’ve seen this year, even the Fed’s ability to control rates is limited. Even though inflation has been coming down and the Fed has lowered rates in recent months, bond rates have risen over the past few weeks. That’s a result of the uncertainty described above.

Each time the Fed’s Open Market Committee meets, it issues a statement that includes committee members’ expectations for future rate changes. Recent events, though, remind us that even when officials do know which way policy is headed, it still may not have the intended result. This year, in fact, the market has gone in precisely the opposite direction.

Stock-picking is difficult but may be even more difficult at times like this. A recent MarketWatch article argued that, “it is a good time to be a stock picker right now.” Proponents of active management like to make this argument during periods of market volatility, when it seems easier to separate winners from losers. But recent events don’t support this argument. Consider the news that authorities in Beijing have opened an investigation into American manufacturing firm DuPont. Its shares dropped 16% in one day, and this isn’t an isolated case. Stock prices continue to be knocked around by the news of the day.

Even the most sophisticated investors are having a hard time. As The Wall Street Journal described recently, Wall Street pros have been just as whipsawed by recent events as everyone else. One hedge fund manager described waking up every 15 or 20 minutes during the night to check the news. Some might see this as a stock-picker’s market. To me, it’s a picture-perfect example of why index funds are a better bet.​