Investors Come Back to the Market at the End of April

The March market decline intensified in April after the President’s official announcement of reciprocal tariffs.  Although tariffs were anticipated, it was the magnitude of the tariffs that caught investors by surprise.  The market fell sharply for four consecutive trading days.  In this precipitous decline it looked like a distribution cycle with money leaving the market.  It differed from the rotation from growth to value we observed in the first quarter.  By the middle of April, only two industry sectors were positive year to date and those were the most defensive sectors, consumer staples and utilities.  

The 90 day pause to allow for negotiations announced on April 9th brought a sigh of relief from investors and the market surged.  For the remainder of the month, the market was news-driven.  It bounced up and down depending upon the latest news release.  By the 22nd the expectation of trade deals and tariff concessions encouraged buyers to come back to the market and it moved steadily higher for nine consecutive trading days.  

By the end of the month there was significant improvement across the board.  All sectors except technology and consumer discretionary were positive or close to break-even year-to-date.  Only technology and consumer discretionary remain solidly negative for the year, and they cut their losses significantly.  Over 40% of the S&P 500 Index is made up of technology and consumer discretionary stocks.  This explains why the index is dragged down when these sectors underperform.  

Gold is the clear leader year to date with a gain of 25% in four months.  In April it logged an all-time high of $3,500 a troy ounce.

It may be time for gold to take a breather.   It has been a safe haven for investors during April’s turmoil, but with the market improving, gold has pulled back.  A period of consolidation here before moving higher would be healthy for gold.    

International stock markets have earned some attention.  Stock markets all over the world declined sharply with the US in early April.   However, some made a sharp V-shaped recovery and have reached new all-time highs by end of the month. Europe and Japan are two areas showing strength for the first time in years.   This is encouraging because it also bodes well for our own domestic market.  If international markets have made a strong recovery, it follows that our own market is on its way to recovery rather than collapse.  

In the last few weeks, growth has made a strong comeback and with it, the major indexes.  The technology sector, although negative year to date, was positive for the month of April.  By May 2nd  the S&P 500 was trading above the March 31 close.

Sentiment is still overwhelmingly negative in spite of the strong recovery.  A reversal and decline below the April low would be concerning.   Trading above that level shows that investors are willing to take the risks associated with stock market investing.

Written by Connie C. Guelich, CFP, AEP, CLU, ChFC. This represents our views at the time of this writing, and it is subject to change. It is not intended to be personal investment advice. If you would like to discuss your own account, please don’t hesitate to call us.