April Volatility and Trade Uncertainty Impact U.S. Stock Market

🗝️ Key Points

• April marked one of the most turbulent months for the U.S.
• The "Sell in May" adage is looming as historical data suggests May is among the weakest months for stocks.
• Early April saw market upheaval due to reciprocal tariffs, but a 90-day delay by President Trump eased some concerns.

April marked one of the most turbulent months for the U.S. stock market in the last five years. The “Sell in May” adage is looming as historical data suggests May is among the weakest months for stocks. Early April saw market upheaval due to reciprocal tariffs, but a 90-day delay by President Trump eased some concerns. Recent agreements between the U.S. and the UK have been well-received, but future negotiations remain uncertain.

The Federal Reserve (Fed) continues its cautious monetary stance, keeping interest rates at 4.25%-4.50%. Despite fears of economic shock from tariffs, short-term indicators have not significantly worsened. The ISM non-manufacturing PMI rose to 51.6 in April, indicating stability in the service sector, which forms over two-thirds of the economy. However, rising prices for materials and services suggest growing inflationary pressures from tariffs.

Fed Chair Jerome Powell noted that while high tariffs could increase inflation and unemployment, the economy has shown little sign of this so far. Fed officials have reiterated a unified stance, with concerns that tariffs could raise inflation and unemployment.

Market dynamics are in flux, with recent stock fluctuations. The healthcare and communication services sectors led declines, while industrials and consumer discretionary saw gains. Despite volatile trade conditions, strong corporate earnings have helped stocks rebound. However, prolonged trade uncertainties could heighten recession risks, as noted by Barclays.

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