he key takeaway from last week is that markets are likely to remain volatile as investors adjust to mixed economic signals, sticky inflation, and uncertain monetary and trade policies. Even minor negative surprises could be enough to spark a pullback with stock valuations at historically exuberant levels. While the long-term outlook remains constructive, expect bumps along the way as new data emerges.

The momentum didn’t exactly spill over to the lesser-known companies as the small-cap Russell 2000 and the mid-cap S&P 400 both traded in a sideways fashion for the week as they are attempting to make new year-to-date highs but are still a bit behind their records set last year.

Despite the pullback, major indexes hovered near record highs set earlier in the week or the previous week. The primary driver was renewed trade tensions after the U.S. announced new tariffs on more than 20 countries, including steep duties on Brazilian and Canadian goods. Investors also digested the passage of the new tax bill and learned that the US operated in the red for the second time this year with a $27 billion surplus driven by strong tax receipts and tariff revenues.

Other markets reacted to a mix of inflation signals, geopolitical risk, and shifting expectations around Fed policy. These drivers lifted both oil and gold, moved bond yields higher, and pushed the dollar to multi-year lows before a late week rebound.

This holiday-shortened week has the potential to pack a big punch, with three major economic reports on deck that could shape the market’s next move. All this being delivered while many will be on vacation (which typically leads to light volumes) could introduce some volatility.