April Fools
May 7, 2025
April market activity was no joke. In early April, following President Donald Trump’s tariff announcement the S&P 500 saw two subsequent single day drawdowns exceeding all of those since 2011. Since then, there have been attempts at market rebounds but it’s too soon to say whether the market will move out of these losses or continue its downward trend. Volatility has calmed moderately as talk from the White House indicated that specific tariffs, with regard to both nations as a whole as well as particular classes of goods, could be paused but this early selloff in the month resulted in equities returning -1.05% and +0.01% for the month as tracked by the S&P 500 and the NASDAQ indexes. The NASDAQ ending the month in the black is quite an impressive feat.
While international equities spent the early part of the month selling off in sympathy with US markets, they managed to recover and returned +0.37% and +0.49% as tracked by the MSCI All Country World Index (ACWI) and the MSCI Emerging Markets Index, respectively. While bonds have echoed some of the volatility in equities, they were ultimately a net positive asset class to operate in as fixed income ended the month +0.11% as tracked by the Bloomberg Global Aggregate Unhedged Total Return Index.
A concerted effort by the United States to address the budget deficit and to equalize trade relationships has manifested into proposed tariffs. The natural path of tariffs has been down for roughly the last century1, and changes in those tariffs presented on ‘Liberation Day’ have the potential to have significant impact. Moreover, the Fed has spoken to their goals of 2% inflation and a sustainable Gross Domestic Product (GDP) growth rate, and both factors are left deeply vulnerable to changes in tariffs. Sixty-eight percent of US GDP is driven by consumption.1
In a consumption driven economy if goods become prohibitively expensive to consume, it raises the question- where will GDP then come from? Tariffs on imported goods could radically change consumers' spending patterns, having a noticeably direct impact on US GDP. In addition, tariffs stand to have further impact on inflation by way of the direct relationship between the two. Inflation has been an issue that the Fed is accommodating and, coupled with their targets for GDP, has led to the decision to keep rates steady.
With little volatility, falling consumer sentiment has followed hitting a sentiment peak in March of 2024.1 The Conference Board produced a study in late April that shed even more light on consumer sentiment. The report noted "The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions— dropped to the lowest level since October 2011 and well below the threshold of 80 that usually signals a recession ahead”.2 While that highlights the negative consumer sentiment,it’s relevant to note that sentiment is not necessarily reality. In any case, diversified portfolios are designed to weather the storm so while the headlines that have been flying around are alarming, it’s reassuring to see that most major indices ended the month in the black. In addition, many diversified portfolios roughly in line with a 60/40 allocation have ended April with flat-positive year-to-date performance numbers. Fortunately, these diversified portfolios are designed to weather the storm.
Hazel Allen
Portfolio Management Analyst
1 “Guide to the Markets.” AM JP Morgan, J.P. Morgan, 22 Apr. 2025 (opens to PDF)
https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/guide-to-the-markets/daily/mi-daily-gtm-us.pdf (Published April 22, 2025;Accessed May 1, 2025)
2 “US Consumer Confidence.” The Conference Board, The Conference Board, 1 Apr. 2025, www.conference-board.org/topics/consumer-confidence (Published April 1, 2025, updated April 29, 2025; Accessed May 1, 2025)
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market, and itis highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.
The Bloomberg Global Aggregate Unhedged Total Return Index is a benchmark that measures the value of global investment grade debt. It includes fixed-rate bonds from developed and emerging markets and is reported in US dollars.
The MSCI All Country World Index(ACWI) captures large and mid-cap representation across Developed Markets (DM)and Emerging Markets(EM) countries. The index covers approximately 85% of the global investable equity opportunity set.
The MSCI Emerging Markets Index consists of 23 economies including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. The MSCI is a float-adjusted market capitalization index.
Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period.
The Conference Board, Inc. is a 501 non-profit business membership and research organization. It counts over1,000 public and private corporations and other organizations as members, encompassing 60 countries.
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