When looking at the stock market from a gross performance standpoint, the last 3 months seem extraordinarily boring. The S&P 500 is flat since Feb 28, yet the last 3 months could be classified as anything but uneventful. March saw the first negative month in quite some time, as small tariffs were placed on Canada, Mexico, and China, igniting fears of a global trade war. Shortly thereafter, the Atlanta Fed’s GDPNow model revised Q1 GDP growth down to -2.8%, suggesting a more severe economic contraction. Anticipation of further disruption was realized on “Liberation Day” – April 2 – when President Trump announced tariffs on all imports and additional tariffs up to 50% on countries with a trade surplus with the United States. Retaliation followed, primarily initiated by China which announced its reciprocal tariffs of 34% on US goods, further escalating the trade conflict. This culminated in the S&P falling 5.5% on April 4th, marking its worst single-day loss since the pandemic. Investor sentiment plummeted to its second lowest level since records began in 1952, while the market followed suit, erasing $6.6 trillion in just two trading days. The market was in absolute free-fall, and it felt nothing could stop it as investors feared to catch a “falling knife.”

After hitting a total intra-day drop of over 20% across the major indexes in a short time, the market took a U-turn as President Trump announced a 90-day pause on most tariffs, excluding those targeting China. This led to a historic rally, with the S&P 500 surging 9.5% in a single day, the most since 2008. Of course, this did not ease all tensions as the market continued to trend downward the following days, but this was short-lived as key data points supported a quick recovery. After an 11.8% rebound the second half of April, the S&P 500 rallied more than 6% in May, marking its best performance for the month since 1997. Trade de-escalation was a big tailwind and US and China agreed to dial back punitive tariff rates more aggressively than expected. We then had a third straight month of cooler inflation data, with headline CPI in April the lowest since February 2021, followed by a stronger-than-expected earnings report. First quarter earnings also came as a huge surprise to the upside with earnings growth of 13.3% vs 7.2% expected. 73% of companies in the S&P exceeded consensus, with their blended earnings more than 10% above estimates, boosting investor confidence in economic fundamentals. We hit the post-“Liberation Day” low 2 months ago, and since this bottom the S&P has bounced over 20%, which marks the fourth-best two-month rolling return since 1990… just as we all expected. So what’s next?

The truth is nobody knows. And do not let anyone tell you that they do. Just as soon as all major Wall Street firms began updating annual forecasts to strong losses for the year, the market recovered, once again making their near-term projections obsolete. Though we have technically “recovered,” the short-term is still filled with loads of uncertainty. In the last week alone, inflation has come in cooler than This market commentary is provided for information purposes only and is not a complete description of the securities, markets, or developments referred to in this material. Any opinions are those of the author and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results. Private Wealth Advisor is a designation awarded by Raymond James to financial advisors who have demonstrated a mastery in anticipating and managing the needs of high-net-worth individuals, families, and organizations.

anticipated and we have reached a trade agreement with China: two catalysts many would expect to spark even stronger upward movement. Yet, the market reaction has been muted. This is a perfect reflection of how much good news is currently priced in, and there are still plenty of volatility-inducing events lurking. For one, by no means is there finality with the trade deals with any country, even China, as we all know how volatile that relationship can be. Just as we saw in April, these deals can both progress and fall apart in the matter of a 30-character tweet. In the same light, geopolitical tensions only continue to increase, headlined by aggressive bombing between Iran and Israel. Further escalation appears imminent as nuclear threats seem to supersede nuclear agreements, which has sent oil prices on a seesaw as investors try to determine the severity of this conflict. Though this is most prominent, we still have Russia/Ukraine, India/Pakistan, and China/Taiwan/US. Any of these have the ability to be a market shaker should drastic developments occur. Rates also remain elevated and although the consumer has stayed fairly strong, with how much leverage is in our system, the longer rates remain elevated the more damage can potentially be done.

This is not to say the only way is down; it is another indication that in the short-term, we simply do not know. What we do know is the market lately has behaved far from normal. Drops typically do not happen as drastically as they did this year, but recoveries also rarely happen so quickly. We have seen investor sentiment change from one major extreme to the other and back in a matter of weeks. Though this may be unique, it provides yet another set of datapoints confirming that timing the market is near impossible, and that investors with a long-term focus will often do better than those who trade from emotion. I doubt we will see many recoveries as sharp as this one, but one thing I can confidently say is this is not the last drop we will experience. Whether it comes in a week, a year, or 10 years, it will happen again. And you know what? So will the recovery, regardless of if it takes weeks, months, or years. By owning high-quality names and maintaining proper asset allocation, one can take steps to endure these market cycles. Just remember, it’s called a cycle for a reason, and like it has for centuries, this wheel will continue to turn.

John Webb 

Private Wealth Advisor 
Pinnacle Asset Management
Raymond James Financial Services 

Kidd Private Wealth Group