If you somehow managed to avoid all news for the first 4.5 months of the year, first of all, congratulations. Second, you may now look around and think that it has been a boring year. However, we know this year has been anything but boring. And even with all the headlines (tariffs, Russia/Ukraine, India/Pakistan, pausing tariffs, first U.S.-born Pope), we’re back to where we started.
If you were following the news, but couldn’t take any more and stepped away from your screens in early April, the headlines were grim. The S&P 500 was down more than 15% for the year and had just logged its steepest four-day loss since the pandemic after the White House unveiled a new wave of global tariffs. The Nasdaq Composite looked worse, off 24% from its December peak. But, by Thursday of this week, the picture had flipped—S&P now shows a slight year-to-date gain of about 0.7%, and the Nasdaq is essentially flat at –0.7%. That 15-percentage-point swing in barely five weeks ranks among the sharpest round-trips on record.
The Descent: February to April 8
Three forces drove the sell-off:
- Tariff Shock. Late on April 2, President Trump announced sweeping import duties. Over the subsequent four sessions, the S&P shed 12%, erasing $5.8 trillion in market value—the worst four-day dollar decline since the index was created.
- Higher-for-Longer Rates. The Fed’s March meeting signaled no near-term rate cuts, cementing the upper bound at 4.5 percent. Growth stocks, already sensitive to tariff headlines, took the brunt of the move.
- Earnings and Guidance. Tech leaders warned of supply-chain noise and softer export demand, knocking expectations into the gutter just as macro fears peaked.
By April 8, the S&P closed 11% below its April-opening level, and volatility spiked to post-COVID highs.
The Rebound: April 9 to May 15
The run-up started almost as abruptly:
- Tariff Truce. On April 9, the White House announced a 90-day pause on the new tariffs (excluding China). The S&P jumped 9.5% that session, and the top-ten megacaps clawed back $2.1 trillion of the $5 trillion they had lost in the downswing. Then on May 11, news broke of a positive meeting between the U.S. and China, which moved the S&P up another 3% the following day.
- Cooler Inflation. March CPI printed –0.1% month-over-month, ending a 57-month run of positives and pushing year-over-year core below 3% for the first time since 2021. Bond yields fell, easing pressure on equities.
- Relief-Bid Buying. According to JPMorgan, retail investors poured $50 billion into equities from April 9 through month-end, matching the S&P’s 15% rally nearly tick for tick.
From the April 8 low, the S&P advanced 19% and the Nasdaq 25%, qualifying as a new bull market after only 23 trading days. Sector leadership flipped: semiconductors and cloud software, hardest hit in March, led April’s bounce, while defensive utilities lagged.
Where Things Stand Now
A few observations:
- Breadth Is Solid. Equal-weight versions of the S&P remain slightly ahead of the market cap index, reminding us there are more stocks than just the magnificent seven.
- Volatility Is Still Elevated. The VIX has retreated from its April spike, but at 18 sits above the 2023 average of 16.
- Macro Drivers Look Friendlier. Four months of cooling inflation, a tentative tariff truce, and steadier earnings guidance have calmed rate-cut speculation; futures now price the first Fed trim in September, not June.
What Could Break the Calm
- Tariff Talks Falter. The current agreement is a “framework,” not a treaty. Any back-pedaling could revive the April angst.
- Sticky Services Inflation. Goods prices are rolling over; services are not. A re-acceleration could push Treasury yields and re-price equities.
- Earnings Fatigue. Q1 beats were driven by cost cuts more than revenue growth. If top lines don’t improve, margins may compress in the second half.
While this update focuses on the numbers, one lesson still stands out: investors who sold in early April had to decide when to get back in—and the market didn’t wait. Over the past twenty years, missing the ten best days in the S&P cut total returns roughly in half, and those days often land during or just after corrections. Staying invested through the noise remains the statistically superior play.
This year has already delivered a complete boom-bust-boom cycle in just over four months. The S&P is back to even, the Nasdaq only a hair below. Whether the next move is higher, lower, or sideways will depend on tariffs, inflation, and the Fed’s next steps. What’s clear is how quickly sentiment can turn and how expensive it can be to trade headlines instead of sticking to a disciplined, long-term plan.
Markets / Economy
- Markets moved higher again this week on the news that tariffs between the U.S. and China are de-escalating. The S&P finished up 5.3%, the Nasdaq was up 7.2%, and the small-cap Russell 2000 was up 4.5%.
- Core CPI stood at a four-year low of 2.8% in April, unchanged from March and matching market forecasts.
- Headline CPI eased to 2.3% in April, the lowest since February 2021, below the 2.4% reported in March.
- Retail Sales rose by 0.1% MoM in April, following an upwardly revised 1.7% surge in March. The modest gain suggests consumers scaled back spending in response to a wave of tariff announcements in early April.
- The University of Michigan consumer sentiment dropped sharply to 50.8 in May, down from 52.2 in April and well below market expectations of 53.4, according to preliminary estimates. This marks the fifth consecutive monthly decline, the lowest reading since June 2022, and the second-lowest on record.
Stocks
- U.S. equities were in positive territory. Technology and Consumer Discretionary were the top performers, while Healthcare and Real Estate lagged. Growth stocks led value stocks, and large caps beat small caps.
- International equities closed higher for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield increased seven basis points to 4.44% during the week.
- Global bond markets were in negative territory this week.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
