The month that shook the markets

April has been one of the wildest months in recent memory for markets. The Dow is on a six-day winning streak, its longest continuous rally since July. Yet the blue-chip index is on track to finish down 3.5% on the month because the stock market has been recovering from a steep slump caused by President Donald Trump’s tariffs. The S&P 500 dropped more than 11% in the first eight days of the month as Trump on April 2 unveiled his “reciprocal” tariffs. After turmoil in the bond market and Trump’s 90-day pause on most tariffs, the benchmark index has since steadily regained ground and is on track to end the month down just 1%. The Dow was down 640 points, or 1.58%, Wednesday morning. The S&P 500 fell 2% and the tech-heavy Nasdaq Composite slid 2.6%. Trump on Wednesday posted on social media, “This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th.” “Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers,” Trump wrote. “Our Country will boom, but we have to get rid of the Biden ‘Overhang.’ This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!” The stock market during Trump’s second term was third-worst performance during the first 100 days of any presidential term in US history, following only President Richard Nixon and President Gerald Ford. “We don’t expect that it’ll be some sort of sudden recovery, unless all of a sudden the tariffs are all removed,” said Kelly Bouchillon, senior partner at Sound View Wealth Advisors. “And, you know, make no mistake about it. This is very clearly brought on by the uncertainty surrounding the tariffs, period.” In comparison, the stock market soared 5% across Trump’s first 100 days of his first term and 8.5% across President Joe Biden’s first 100 days, according to data from CFRA Research. The S&P 500 soared to back-to-back gains of more than 20% across Biden’s last two years in office, a feat not achieved since the 1990s. Commerce Department data released Wednesday showed the US economy contracted in the first quarter for the first time since 2022. Trump’s policy agenda has injected enormous uncertainty into businesses across the United States and shaken consumer confidence. After a volatile month for markets, investors are trying to assess whether the United States will enter or avoid a recession in the coming months. While the S&P 500 has steadily climbed out of its slump, uncertainty lingers about how Trump’s trade policy might continue to impact the economy and markets. “How things pan out over the next hundred days in the US and elsewhere will partly hinge on whether US markets (Treasuries in particular) and corporate America continue to act as effective guardrails against Trump’s policies, as they appear to have done since April 2,” said John Higgins, chief markets economist at Capital Economics, in a note. Markets test Trump As stocks whipsawed this month, volatility gripped Treasuries and the dollar broadly weakened, leaving investors wondering whether this was just a bout of extreme abnormality or a foreshadowing of more turmoil to come. Typically, when stocks sell off during moments of immense uncertainty, investors seek refuge in safe havens like US government bonds and the dollar. Yet that key relationship largely broke down during a sell-off in all three American assets. “Market participants were a little bit caught off guard in terms of the tariffs coming in much higher than what they would have expected,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “That caused a lot of market volatility.” This month has been a rollercoaster for bonds. The yield on the 10-year Treasury has dipped below 4%, spiked above 4.5% and since come down below 4.2%. Yields and prices trade in opposite directions. While unnerving, the volatility in the Treasury market proved to be a formidable test for how far the Trump administration would go before backing down on its tariff policy, Ripley said. “They have big ambitions from a trade policy perspective, and the market clearly told them they can only go so far,” Ripley said. Meanwhile, the US dollar has sharply weakened against currencies like the euro and the yen. These are rapid shifts in markets — and occurring at the same time as the brief slump in stocks has shaken investor sentiment. Whether the market can continue to serve as a restraint on Trump’s intent to implement aggressive trade policy has ignited debate on Wall Street. “The Trump administration, like others before it in the US and elsewhere, tempers its policies when faced with a nervous Treasury market,” said Kit Juckes, chief FX strategist at Societe Generale, in a Tuesday note. “But the desire to reorganize the global trading system, and the belief that this can be achieved without hurting the US economy, has deep roots. That means that for every time the language from Washington is tempered by market events, the language will re-escalate as the market calms down,” Juckes said. Commerce Secretary Howard Lutnick on Tuesday told CNBC that Trump is not focused on the markets. “That may have been whatever it was in the first term,” Lutnick said. “This term, he’s trying to reset global trade.” Jeff Buchbinder, chief equity strategist at LPL Financial, said in a Tuesday note: “Unfortunately, history tells us April showers likely won’t bring us May flowers. The old investor adage of ‘sell in May’ also suggests US stocks may continue to chop along in the near future, with the potential for more bouts of volatility in the months ahead.” This is a developing story and will be updated.