For stocks, April was a volatile month that featured three distinct phases. In the end, U.S. stocks finished modestly lower and international stocks posted gains. 

Phase one

On April 2, the Trump Administration revealed Liberation Day, announcing a 10% baseline tariff on most countries and higher “reciprocal tariffs” on many more, including some of our larger trading partners. Capital markets did not like it. Stocks sank rapidly and U.S. bond yields rose, signaling that investors were souring on the world’s largest market.

Phase two

Just about a week later the reciprocal tariffs were postponed for 90 days, with the intent of negotiating terms on an individual country basis. The S&P 500 responded with its largest one-day gain since the financial crisis in 2008. Stocks then spent the next two weeks bouncing around but generally trending lower again.

Phase three

A new rally began on April 22, with U.S. stocks gaining in each of the final seven trading days, almost recovering all losses from earlier in the month. It is hard to say what drove the rebound, but it was led by retail investors who seemed to embrace the “buy the dip” mentality.

Riding the waves

We are reminded that tariffs are likely to create a “supply shock,” similar but much smaller than Covid. Just as trying to time markets in that period proved difficult, we believe investors should avoid emotional responses and maintain long-term strategies. Hopefully, we have passed peak confusion around tariffs and both investors and companies can start to adjust to the new policies. However, uncertainty remains high, and no one should be surprised by more change and more volatility in either direction.      

Largely lost in the tariff news, with over 70% of companies reporting, S&P 500 earnings growth is trending toward 12.8%, according to FactSet.¹ Tariffs won’t materially impact these numbers until the second quarter, but there is strong momentum.