U.S. stocks finished April slightly negative as the S&P 500 declined 0.7%. Volatility exploded higher the first week of the month as the Trump Administration unveiled its new tariff policy on April 2nd. The level of tariffs was much higher than expected, sending stocks into free fall. The S&P lost 12.1% of its value in just four trading days. On April 9th, President Trump announced a 90-day pause on tariff implementation for every country except China, effectively setting the tariff rate at 10% for most U.S. trading partners. The stock market staged one of the largest one-day rallies in history on the news, rebounding 9.5%. The market inched higher over the rest of the month as investors assessed potential changes to tariff policy and the subsequent economic effects.

The good news surrounding the recent selloff in U.S. stocks was diversification did its job. While U.S. stocks finished down on the month, international stocks were up as the MSCI ACWI Ex USA gained 2.7%. The US dollar weakened by 4.5% over the course of April as investors sold dollar-based assets and purchased stocks and bonds priced in currencies such as the Euro and Yen. This provided a tailwind for U.S. owners of international assets. Fixed income also provided protection in April as the Bloomberg U.S. Aggregate Bond returned 0.4%. Intermediate-term treasury yields finished the month 10-20 basis points lower as investors sought the protection of government bonds. The declining yields provided a boost to fixed income prices.

The market is now in “wait-and-see” mode as investors assess the economic fallout from the tariff announcements. Business and consumer sentiment are depressed, and inflation is likely to move higher because of the tariffs. However, hard economic data on employment and consumer spending remains relatively strong, though these could weaken as more up-to-date data comes rolling in. Decreasing uncertainty and a quick resolution with our largest trading partners would likely prevent a recession, leading to limited rate cuts and rising stock prices. Persistent uncertainty and a long, drawn-out trade war would likely result in recession, leading to significant rate cuts and falling stock prices. The market is expected to remain range bound until the trade and economic outlook become clearer.

While U.S. stocks will remain volatile over the coming months, it is important to remember that the S&P 500 is not your portfolio. In addition to U.S. stocks, we invest in equities located outside of the U.S., fixed income,alternative assets, and cash. These investments serve as diversifiers to U.S. equities, helping to decrease correlation and volatility within a portfolio. If you have any questions or concerns relating to the market or your portfolio, please reach out to a member of the Aurdan team.

IMPORTANT DISCLOSURES

The views, opinions and content presented are for informational purposes only. The charts and/or graphs contained herein are for educational purposes only and should not be used to predict security prices or market levels. The information presented in this piece is the opinion of Aurdan Capital Management and does not reflect the view of any other person or entity.  The information provided is believed to be from reliable sources, but we cannot guarantee the accuracy or completeness of the information, no liability is accepted for any inaccuracies, and no assurances can be made with respect to the results obtained for their use.  The information contained herein may be subject to change at any time without notice. Past performance is not indicative of future results.