New York, NY — The U.S. stock market has made a remarkable recovery since a tumultuous period marked by steep tariffs announced by former President Donald Trump. Following a significant decline, major indices have rebounded, bringing fresh uncertainty to investors and economists alike as they assess the long-term implications of Trump’s trade policies.
On April 2, President Trump unexpectedly rolled out aggressive tariffs on nearly all U.S. trading partners, igniting widespread concern about potential economic fallout. In the days following, the S&P 500 plummeted by approximately 12%, while the Dow Jones Industrial Average sank nearly 4,600 points, dropping about 11%. However, by last Friday, the S&P 500 rallied 1.5% for its ninth consecutive gain, returning to levels last seen before the tariffs were revealed.
The volatility began to shift on April 9, when Trump declared a “90-day pause” on most of the proposed tariffs, with the exception of those targeting China. This announcement sent the S&P 500 soaring 9.5%, marking one of its best trading days in history. Nevertheless, just hours before this declaration, Trump encouraged his followers on social media, claiming it was a prime time to invest, raising eyebrows among market watchers.
In the weeks that followed, the market experienced a roller coaster of reactions. Trump proposed negotiating with trading partners while simultaneously pushing for companies to relocate manufacturing to the U.S. This dual approach left many investors puzzled. However, the mention of a de-escalation in tensions between the U.S. and China, along with cuts to tariffs on automobiles and technology, provided some relief to market participants.
The initial decline in stock prices surprised many, given that Trump had often touted the stock market’s performance as a success during his presidency. Analysts pointed to fears in the bond market as a potential contributing factor to his shift in policy. Declining prices for U.S. government bonds and a weakened dollar signaled rising investor unease, prompting Trump to acknowledge the growing concerns among bond investors.
Despite rocky sentiment, economic indicators provided a mixed picture. Consumer confidence surveys reflected uncertainty fueled by the trade policies, while data on employment showed resilience, with employers adding 177,000 jobs in April. This contrast suggests that while consumer confidence may be faltering, the economic fundamentals remain relatively strong.
The Federal Reserve cut interest rates three times in late 2024 but has taken a pause since, hoping to evaluate the effects of the ongoing trade tensions. The robust jobs report seemed to give the Fed justification to hold rates steady for the time being, even as Trump continues to advocate for further cuts.
Amidst the turmoil, U.S. corporations have largely exceeded profit expectations for the start of the year. Approximately 75% of the companies in the S&P 500 surpassed analyst forecasts, highlighting strong performance from giants like Microsoft and Meta Platforms. Analysts project an annual growth rate of nearly 13% for these firms, according to FactSet.
While companies have posted impressive profits, many have also expressed caution about the sustainability of this growth amid ongoing uncertainty. Some CEOs have revised their financial outlooks downward, considering different scenarios that may unfold based on the administration’s trade strategy. United Airlines, for example, presented two distinct forecasts for the year, illustrating the market’s highly unpredictable nature.
As the 90-day pause continues, speculation remains regarding whether Trump’s administration will pursue additional tariffs after its expiration. Financial experts, including Chris Zaccarelli, chief investment officer for Northlight Asset Management, suggest that unless there is a significant shift in policy, the market could face a downturn reminiscent of early April’s volatility.
Investors continue to navigate a landscape marked by uncertainty and high stakes. With the potential for further developments in trade policy on the horizon, all eyes remain on the stock market as it grapples with the implications of this unprecedented economic climate.