Published April 25, 2025
Stocks are looking to bounce back from a horrid beginning of April. The S&P 500 has rallied back to the “scene of the crime” where it broke down decisively at 550-560. Is there enough momentum to push through the resistance AND above the 200-day (40-week) moving average at 570? That’s what technical market analysts are looking for.
President Trump has appeared to try and remind investors of the “Trump Put” whereby the President offers soothing words and/or a reversal in position when markets are melting down. Investors came into the year betting that Trump would be highly attuned to the stock market; he would have their back, as it were. But when markets began to unravel in late March/early April, he told reporters he didn’t care about the market. As the panic spread to U.S. Treasury bonds, the President relaxed his position on tariffs, giving a 90-day pause before implementation. Stocks staged their largest one-day advance in over a decade. Then, Trump sent markets into a tizzy again by attacking Federal Reserve Chairman Powell, who also held the position during Trump’s first term. The Fed Chairman has built up substantial credibility with markets through his generally transparent communication style. He may be “too late” in some of his policy actions. But he does let investors know what he’s seeing and using to make decisions. As Trump pushed harder on the Fed Chairman in the media, markets once again became very nervous. This forced Trump to back off once again. These two very recent cases of Trump acquiescing to market nervousness is ultimately good for stocks. It puts a floor under the market, to some degree. Next, the question is whether Trump truly steps back from some of the tariffs and what, if any, damage has been done to the economy from the marked uncertainty of the past three months.
Interestingly, international stocks never took that second leg down and have now erased the early April plunge, helped along by a steep decline in the U.S. dollar. The dollar has fallen by 10% since the beginning of the year (another sign of investor uncertainty).
Gold has returned to being a safe-haven investment (after notably not playing that role during the Great Financial Crisis in 2008-2009). The metal has gone parabolic during the market storm this month.
As we noted last week, these ultra-wide swings in prices are indicative of a bear market. However, there are three types of bear markets: structural, cyclical, and event-driven, with event-driven bear markets being the briefest of the three. Was the tariff shock merely an event that drove a short-term dislocation in prices? International markets are acting that way. Or is there a recession either underway (as Larry Fink, CEO of finance behemoth Blackrock says) or on its way (as very many economists suggest). If so, we will have a much longer slog before stock prices return to new high ground. In the meantime, earnings reports are in full swing to offer fresh data (rather than rhetoric) for investors to consider. The data might be enough to stem the tide and calm markets down.
Market Update
What the Wall Street Journal called the “Sell America” trade picked up steam Monday after reports that President Trump was looking for ways to remove Fed Chair Powell while also assailing him via social media. Stocks tumbled -2.6% and Treasury bonds slid while gold, the safe haven during this month’s market rout, continued climbing to record highs. Treasury Secretary Bessent stepped in Tuesday to offer reassurance saying that “de-escalation” in the trade war with China was possible. Stocks reversed Monday’s losses and kicked off a sharp rally. The move gained steam Wednesday when Trump told reporters that he had no intention of trying to remove Powell while also suggesting that tariffs on China could be cut in half. Stocks added +1.7% on those reports. Earnings reports from a wide range of companies came in solidly to further support the newfound optimism. Earnings from software provider ServiceNow and chip company Texas Instruments combined with rising hopes that the Fed might cut interest rates this summer to boost stocks again Thursday. The S&P 500 added +2%. The index posted a fourth straight gain Friday, this time +0.7% on strength in earnings from Alphabet/Google as expectations for relaxed tariffs continued to underpin investor hopes.
After looking set to test the market’s lows Monday, stocks rebounded fiercely to close the week with a strong +4.60% gain in the S&P 500. The Nasdaq 100 (QQQ) recovered a hefty +6.41%. Small cap stocks posted a +4.10% rise.
Warm wishes and until next week.