Tariffs, Turmoil, and a 12% Rally: Dissecting April 2025’s Wild Ride

Friday was the 21st trading day since the Liberation Day ceremony in the White House Rose Garden. If you were lucky enough to take a month-long vacation and pay no attention to the market since April 2nd, you would believe you didn't miss much.

After a sharp sell-off, the Administration reversed course to stem the damage. As the tone on tariffs softened, equities reversed course with extreme short-term upside. While the S&P 500 has gone nowhere in the last month, as illustrated below, it was one of the most extreme positive reversals and one of the most volatile periods in market history.

It is possible that the longer current policies remain in place, the more likely the economy is to suffer. For now, economic data and earnings-related news have been better than the most

pessimistic forecasts. News related to tariffs over the last three weeks has been moving in

the right direction, which is positive, but given the nature of the entire situation,

it only takes one comment or post for things to move in the other direction. Investing is only easy in retrospect!

I've always said investing based on the newspaper's front page is a recipe for financial disaster. The point is that markets are forward-looking, so if the front page of the New York Times or Wall Street Journal talks about a recession, the market priced it in months ago.

The last three weeks have been a perfect example. The headlines below are from the front page of the New York Times every day since April 9th – the day after the post-Liberation Day low. They're all about tariffs, trade wars, an economy on the brink, and political turmoil. In a vacuum, you'd guess that these events would have contributed to a bear market or at least a sharp market pullback, not a gain of over 12%! As a rule, investors are probably best off skipping the front page altogether.

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One source of market volatility during April came from suggestions that President Trump was looking to 'fire' Fed Chairman Jay Powell, given his relatively hawkish stance towards interest rates. The President probably never had any intention of firing the Fed Chair, but he was laying the foundation to make him the scapegoat if the economy eventually went into a recession. Regardless of the President's motives, he put concerns of firing the Fed Chair to rest later in the month when, on 4/22, he commented that he had 'no intention of firing' Powell.

When the President was ranting about Powell, there was a lot of pearl-clutching about how his 'unprecedented attacks' were an assault on the Fed's independence. How quickly we forget. There are plenty of examples of politicians voicing their differences of opinion with Fed chairs over the years, although probably not as in the open and brashly as President Trump. Paul Volcker is a perfect example. While he now sets the standard for which every other chair is measured, during his tenure, especially early on, Volcker was very unpopular, and politicians and the general public weren't shy about voicing their concerns.

In October 1980, President Carter criticized Volcker for his 'ill-advised' policy of rate hikes (NYT, 10/3/80). Then, Democratic Senator Ted Kennedy urged the Treasury Department to end the Fed's independence (NYT, 4/7/82), and just two months later, a Democratic Texas representative by the name of Jim Wright went even further and called for Volcker's resignation (NYT, 6/9/82). There was even an arrest of a man with a gun who threatened to take members of the Federal Reserve hostage for raising interest rates (NYT, 12/8/81)!

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Getting back to the market, the top left chart below shows the scope of the S&P 500's historic turnaround in April. After falling 11.2% at its lows, the index finished the month down less than 1%. Even though the index couldn't finish in the green (and really make a historic turnaround), it was the smallest monthly decline for the S&P 500 after falling at least 10% intra-month since 1928.

For other major indices, the reversals were just as dramatic. The Nasdaq finished higher on the month, and the only two months where it had a larger gain after falling 10%+ were in October 1998 and April 2001. For the Russell 2000, there have been three other months where the index erased a 10%+ decline and finished the month higher and one other month (Nov 2011) when it almost finished in the black. Finally, in the Philadelphia Semiconductor Index (SOX), there have been three months where the index finished up over 20% after erasing a 10%+ decline and six other months where it erased a 10% decline and finished either modestly higher or lower.

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The S&P 500 didn't quite finish April in positive territory, but it came darn near close. While the S&P has never fully reversed a 10%+ intra-month drop (on a closing basis) to finish the month higher, there have been 14 prior months that have seen the S&P drop 10%+ at its lows and then rally back 5%+ from those lows through month-end. April ended up being just the seventh time that the S&P 500 has rallied back 10%+ to end a month after trading down 10%+ at its intra-month low. In the year following all six of those occurrences (shaded in the table below), it was higher every time for an average gain of 22%.

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In addition to feeling like the longest month in years, April was one of the most volatile months on record. That was especially true during the four days after Liberation Day. For the entire month, the S&P 500's average daily percentage move was just shy of 2% (1.99%), which was the highest average daily change since April 2020 and the 13th month since late 1952 when the 5-day trading week in its current form started that the average daily move was more than 1.75%. For the four trading days after Liberation Day, it was the highest average daily move since just after the 1987 crash.

Below each chart, I show the S&P 500's performance following months when the average daily move was greater than 1.75% and after the four-day average move was greater than 4%. In each scenario, short-term returns over the following month were mixed, but they were well above the historical average in magnitude and consistency over the next year.

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2025 is now the 19th year since 1928 when the S&P 500 traded down 5% or more in the first four months. The table below lists each of those prior years. Unfortunately for bulls, performance for May was weak, with a median decline of 0.2%, and gains just half the time.

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This graph should help prepare investors for May, if May is negative.

In our March 8th, 2025 post, we stated that "if you're thinking long-term, getting riled up about day-to-day noise is not healthy. It usually just causes you to make mistakes in your long-term plans." While it seems hard to accept this advice when we are in a downward trend, it is usually the best advice you will receive.

We have watched the stock market's current state closely. When a change is necessary, we will make it. We harbor no politics or bias in our decision-making and advice. Our only concern is determining what is best for you.

(1) Charts by Bespoke.com. 

Schorn Wealth, LLC believes all information in this report to be accurate, but we do not guarantee its accuracy. None of the information in this report or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. This report is not personalized advice. Investors should do their own research and/or work with an investment professional when making portfolio decisions. As always, the past performance of any investment is not a guarantee of future results. Investors cannot invest directly in an index. Schorn Wealth's representatives or clients may have positions in securities discussed or mentioned in its published content