The stock market rally has been impressive.
Since President Donald Trump paused most reciprocal tariffs on April 9, only days after announcing them, stocks have soared. The S&P 500 has gained about 20%, while the tech-stock heavy Nasdaq Composite is up 27%.
Those returns in such a short span significantly outpace the average 10% annual return for stocks since 1928.
Stocks haven’t been the only winner. Gold has also notched impressive returns this year. The yellow metal has rallied 30% in 2025 as investors have sought to insulate risk amid growing economic concerns surrounding debt and the impact of tariffs on inflation.
The one big disappointment this year: Treasury bonds. They’ve tumbled, sending bond yields soaring, as global investors have soured on financing America’s insatiable appetite for spending.
The market action has captured the attention of many, including veteran commodities and futures analyst Carley Garner. Garner has been professionally navigating these markets for 20 years, and her track record includes accurately predicting the stock rally in 2023 and last year’s decline in oil prices.
Garner updated her outlook on stocks, gold, and bonds, and her takeaway may surprise you.
Stocks, gold climb ‘wall of worry’ as Treasury bonds tumble
Stocks’ rally since the lows in early April likely surprised many, given significant economic risks remain.
While inflation has retreated below 3% from over 8% in 2022, price increases over the past years have cash-strapped consumers, causing them to shift spending from discretionary purchases to essentials.
The problem has been compounded by an uptick in unemployment, which has increased to 4.2% from 3.4% in 2023, partly due to higher interest rates designed to crimp inflation.
According to Challenger, Gray, & Christmas, U.S. companies have laid off 696,309 workers this year through May, up 80% from one year ago.
The situation isn’t likely to get much better for workers. While Trump paused many reciprocal tariffs in April, key tariffs remain, including a 25% tariff on Canada and Mexico and autos, a 10% tariff on all imports, and 30% tariff on China (total tariffs on China, including those put in place during President Trump’s first term exceed 50%).
The remaining tariffs, and potential for more after the 90-day pause expires, could fuel inflation later this year, particularly in retail, which sources everything from clothing to electronics from overseas.
The risk of inflation alongside job losses suggests America could go headlong into a period of stagflation or recession.
Despite those risks, the S&P 500 and Nasdaq Composite have notched remarkable gains. Investors who quickly sold amid tariff announcements earlier this year have been left behind, and as a result, they’re buying every dip to regain their exposure.
One major exception? Warren Buffett.
The Oracle of Omaha has increased Berkshire Hathaway’s cash position, choosing to collect guaranteed fixed income from T-bills rather than leap back into the stock market amid the uncertainty.
Exiting the first quarter, Warren Buffett’s cash stockpile eclipsed $347 billion, a record, and more than double the levels exiting 2023.
Long-time analyst turns attention to beat-up bonds, away from stocks, gold
The rallies in stocks and gold may continue, but like Buffett, Carley Garner doesn’t see the risk-to-reward as overly compelling in stocks. She’s also become bearish on gold relative to bonds, given that gold has moved significantly higher and, unlike bonds, doesn’t pay dividends.
“While I believe the S&P 500 can easily reach 6300 to 6400, the downside risk might be outsized relative to the potential reward,” wrote Garner on TheStreet Pro. “Since 1928, the S&P 500 has returned an average annual rate of 10%; however, in recent years, the average return has been abnormally high, at approximately 14%. There is a good chance that, like the dot-com era, we have pulled forward gains and could be on the verge of a ‘returnless’ market in the coming years.”
Garner points to a key measure favored by Warren Buffett regarding stock market valuation as evidence that stocks are over their skis.