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The US stock market has staged a remarkable comeback, gaining nearly $8 trillion in value since hitting lows on April 8. This turnaround was triggered by President Donald Trump’s announcement of a 90-day pause on the so-called “reciprocal tariffs,” which had previously led to a rare simultaneous selloff of US assets. Investors breathed a sigh of relief following Trump’s reversal, with Ed Yardeni, president of Yardeni Research, stating, “The markets had a tantrum and stomped their collective feet and got what they wanted: Trump to back off.”
The early April selloff was swift and intense, with the S&P 500 entering correction territory in just 22 days.
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Kevin Gordon, senior investment strategist at Charles Schwab, described it as “a free-fall moment” where “investor sentiment got to panic levels.”
However, the recovery has been equally rapid, with the S&P 500 climbing back to positive territory in just 25 trading days, the fastest since 1982. Sam Stovall, chief investment strategist at CFRA Research, noted that “investors think the worst is likely over and that the reason for the panic has largely been undone.”
Market sentiment has rebounded from “extreme fear” in April to “greed” territory, with the tech sector leading the rally. Stocks of companies like Apple and Amazon have surged more than 20% since the April 8 low.
Each time tariffs have been dialed back, forecasters have reduced the odds of a recession.
Stock market stages rapid recovery
JPMorgan Chase economists now see a less than 50% chance of a US recession, down from 60% in early April.
Despite the relief, US tariffs remain elevated at an average effective rate of 17.8%, according to The Budget Lab at Yale. While tariffs on China have decreased to 30%, they are still high enough to cause price increases. Some analysts caution that the stock market rally might be overextended, with Mark Hackett, chief market strategist at Nationwide, noting that “the market has raced from oversold to overbought in record time.” UBS has downgraded its stance on US stocks to “neutral,” indicating that the good news may already be priced in while challenging news looms.
CFRA’s Stovall warns that in two-thirds of all bear markets since World War II, the S&P 500 ultimately made lower lows after recovering from double-digit percentage declines. He emphasizes that there is still a lot of uncertainty and that the rally’s sustainability remains to be seen. The biggest X-factor remains President Trump himself and his evolving trade agenda, with markets potentially swinging dramatically based on changes in policy.
As Stovall puts it, “This was a manufactured correction, and it could be remanufactured if the president wants to change his mind about things.”
