Inside the Historic $8 Trillion Market Comeback
The Rollercoaster of Wall Street
In early April, Wall Street threw a tantrum that would make any toddler proud. Fearing that President Donald Trump’s chaotic trade war might ignite a global recession, investors scrambled to dump US assets. This rare simultaneous selloff of both stocks and bonds signaled a deep lack of confidence in White House policies.
A Sudden Shift in Strategy
However, in a surprising twist, Trump changed his tune. He paused "reciprocal tariffs" for 90 days and took a dramatic step—slashing tariffs on China while many items still faced elevated tariffs compared to pre-Trump levels.
A Spectacular Market Rebound
As policies shifted, US stocks reversed course, embarking on a historic rally. The S&P 500 has not only erased the year’s losses but also gained nearly $8 trillion in market value since its lows on April 8. This remarkable recovery underscores a palpable relief among investors and a decline in recession fears prompted by Trump’s unexpected policy adjustment.
“The markets had a tantrum and stomped their collective feet and got what they wanted: Trump to back off,” remarked Ed Yardeni, president of investment advisory Yardeni Research. “Trump realized he was toying around with liquid nitroglycerine, and that it was time to step back.”
Panic to Recovery: A Rapid Transition
The initial selloff was breathtaking in its speed and intensity. In just 22 days, the S&P 500 closed in correction territory, marking a 10% drop from its record highs in November. According to CFRA Research, this rapid descent was a fraction of the time it usually takes to experience such a correction.
“It was a free-fall moment,” stated Kevin Gordon, senior investment strategist at Charles Schwab, capturing the panic gripping investors.
The Fastest Recovery Since 1982
Contrary to the initial panic, the recovery has been just as swift, marking the fastest comeback since 1982. Data from Bespoke Investment Group reveals it took only 25 trading days to move from down 15% to positive territory.
“Investors believe the worst is likely over and that the culprit behind the panic has largely been addressed,” observed Sam Stovall, chief investment strategist at CFRA Research.
Market Sentiment: From Extreme Fear to Greed
The CNN Fear & Greed Index, which gauges market sentiment, plummeted to an alarming score of three (on a scale from 1 to 100) in April, indicating extreme fear among investors. Fast forward a month, and the gauge has rocketed into "greed" territory, hinting at a burgeoning appetite for risk.
The Driving Force: Tech Stocks Lead the Charge
Interestingly, the tech sector has spearheaded the rally, especially after the Trump administration’s decision to exclude smartphones and other electronics from new tariffs. Major players like Apple (AAPL) and Amazon (AMZN) have surged over 20% since April 8, while Nvidia (NVDA) has skyrocketed more than 40%.
But the excitement doesn’t stop there; sectors like consumer discretionary, industrials, communication services, and financials have also enjoyed significant upticks.
A Glimpse Ahead: Easing Recession Fears
With each tariff rollback, economists have hacked down their recession forecasts. The chance of a US recession is now less than 50%, according to JPMorgan Chase economists, and Goldman Sachs has lowered its recession odds to 35%. Anxiety about tariffs causing turmoil has dissipated, as pointed out by Yardeni, who noted that “Trump couldn’t afford to let this issue fester.”
Uncertainty Lingers
Yet, challenges remain. The average effective tariff rate stands at 17.8%, the highest since 1934 (The Budget Lab at Yale). While tariffs on China have decreased, they still hover around 30%—low enough to restore trade flow but high enough to influence prices.
Investor Sentiment and Future Concerns
As some worry the market rally may be overextended, Mark Hackett, chief market strategist at Nationwide, warned that “the market has raced from oversold to overbought in record time,” suggesting limited near-term upside without a clear growth acceleration.
UBS has also downgraded its stance on US stocks from “attractive” to “neutral,” cautioning that much of the positive sentiment may already be factored into stock prices.
The X-Factor: Trump’s Trade Agenda
Ultimately, the biggest wildcard remains Trump himself and his unpredictable trade policies. The market teeters on the edge, responding to each of his statements, demonstrating just how fragile this comeback can be.
“This was a manufactured correction,” Stovall noted. “It could easily be remanufactured if the president decides to change course again.”
Conclusion: A Cautious Outlook
While the market recovery is impressive, uncertainty still reigns supreme. Investors and analysts alike will be watching closely to see if this rally has the legs to sustain itself, or if new turmoil awaits on the horizon.
