The S&P 500 has been on a historic bull run for the last six months. In fact – one of the best ever. The S&P 500 gained 35% from April to October of 2025, that has only happened ten times in the history of the stock market.
On Friday we got a reminder that stocks can in fact go down. The S&P 500 (SPY) fell 2.6%, the NASDAQ 100 (QQQ) fell 3.6% – the worst single day performance for both indices since early April when stock were plummeting on worries over tariffs. Take a look at the drop in the daily chart below – the S&P 500 wiped out about 5 weeks of gains in one day. This is why Wall Street says “stocks take the escalator up and the elevator down.”
What caused the big sell off on Friday? A replay of a familiar narrative. President Trump said he might issue new tariffs on China because of disputes over rare earth imports. Here are a few more details from CNBC.
President Donald Trump on Friday threatened to slap a “massive increase of Tariffs” on Chinese products imported into the United States to “financially counter” new export controls that China imposed on rare earths from that country.
Trump also threatened in a social media post to cancel his upcoming meeting with Chinese President Xi Jinping because of the dispute.
China controls about 70% of the global supply of rare earths minerals, which are critical for high-tech industries, including automobiles, defense and semiconductors.
“One of the Policies that we are calculating at this moment is a massive increase of Tariffs on Chinese products coming into the United States of America,” Trump wrote. “There are many other countermeasures that are, likewise, under serious consideration. Thank you for your attention to this matter!”
China’s Ministry of Commerce on Thursday said that foreign entities must now obtain a license to export products that contain more than 0.1% of rare earths sourced from that country, or that are manufactured using Chinese extraction, refining, magnet-making or recycling technology.
Is It Time to Panic?
After the sharp drop on Friday, investors are asking an important question – is it time to panic? My opinion – definitely not. In fact, I believe any weakness will be short lived, shallow, and present an excellent opportunity to deploy more cash when stocks are down. Here are a few bullet points to consider.
S&P 500 was overbought after huge rally: After the big 35% rally in six months the S&P 500 was overbought and overdue for a pullback. Remember, the S&P 500 doesn’t go up or down in a straight line. Pullbacks are a healthy feature of an otherwise strong market and they provide opportunities for investors to deploy more cash.
History provides an important road map: We’ve seen the Trump playbook on tariffs: make big tariff threats as a negotiating tool, stocks fall sharply. Eventually dial back the rhetoric, stocks stabilize. Get to a long-term deal, stock jump on the good news. I’m expecting the same formula this time around.
Here are Three More Reasons I’m Optimistic on Stocks
U.S. economy is strong: Gross domestic product (GDP), the broadest indicator of economic strength or weakness, in the US was 3.8% in Q2, the best read in two years. Growth will likely slow a bit in 2026 but from that level there is basically a 0% chance of recession in 2026.
US Economy Grows at Fastest Pace in Two Years
US corporate earnings are strong: Q3 earnings season just kicked off in early October and the S&P 500 is set to deliver another quarter of record earnings. Yes stocks are up a lot in the last few year – but those gains have been driven by strong sales and earnings growth in the S&P 500.
Q3 Earnings Setup Remains Favorable
S&P 500 entering strongest time of year: November and December are historically two of the strongest months of the year for the S&P 500. Bigger picture, the six months between November and April are historically the best of the year.
The Big Picture
The S&P 500 was overdue for a pullback. I view any weakness as an opportunity to deploy more capital and buy low with the S&P 500 heading into its strongest time of the year.
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
