The Stock Market Has Been Sending a Quiet Warning Signal for Years. Here's What History Says Comes Next.

President Donald Trump's return to the White House has ushered in a new era of uncertainty for investors. As they navigate the fallout from his unconventional and often conflicting policy moves, the S&P 500 has largely maintained its upward trajectory, up 17.9% in 2025 and over 11% this year so far. This optimism is primarily driven by the rapid growth of generative artificial intelligence (AI).

However, the question remains: how much longer can stocks continue to ignore the underlying issues? To gain insight, it's worth examining historical parallels. One relevant example is the oil shocks of 1973 and 1979. During those periods, disruptions in Middle Eastern oil supply led to a combination of sluggish U.S. economic growth and rising inflation, a phenomenon often referred to as stagflation.

Currently, the biggest challenge for the market stems from the ongoing war in Iran, which has caused significant disruptions in the Strait of Hormuz. This narrow waterway is responsible for carrying about 25% of the global maritime oil shipment volume. The situation is reminiscent of the oil shocks of the 1970s, suggesting that investors may soon face similar economic headwinds.