April 2023 has turned into a stormy month for the U.S. stock market. We’ve witnessed unprecedented declines and increased volatility of historic proportions during this time. The S&P 500 dropped more than 11% within only the first eight days of the month. That heavy drop off was mainly driven by the economic policies laid out by then-presidential nominee Donald Trump. On April 2, just after announcing his first “reciprocal” tariffs, the market went into a tailspin that would only get worse with every escalation. In the wake of this announcement, the S&P 500 dropped 2%, and the Nasdaq Composite tumbled 2.6%. Analysts are watching the developments with a hawkish eye, with the blue-chip index heading for a finish of about 3.5% down on April.
The stock market, which had already been bounced back from a deep dive that resulted from the economic damage done by Trump’s tariffs while he was president. Incredibly, the S&P 500 flew up 5% in the first 100 days of Trump’s first term. In stark comparison, his second term has just set the third-worst performance of any presidential term in U.S. history over that same span. This recession was made worse by the uncertainty that his trade policies (and their consequences) injected into our economic climate.
As you can see, April has been described as the most volatile month for financial markets in recent memory. The S&P 500 fell 11.2% in those first eight days before scraping together a definitive rally and that, too, was excruciating. Much of this volatility has been deeply felt in stock prices. It has made the bond market a wild ride, with the yield on the 10-year Treasury dipping below 4% at times, shooting back up above 4.5% and settling now back down around 4.2%.
Unprecedented headwinds are buffeting the stock market, as we speak. At the same time, the U.S. dollar has experienced a historic plunge against every major currency, including the euro and the yen. Analysts indicate that this depreciation has to do with investor confidence in the continuation of Trump-like trade policies.
In response to concerns about his tariffs, Trump stated, “Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers.” He expressed optimism about future economic growth, asserting that “Our Country will boom, but we have to get rid of the Biden ‘Overhang.’” Nevertheless, many market participants remain skeptical.
Charlie Ripley, a senior investment strategist, remarked, “Market participants were a little bit caught off guard in terms of the tariffs coming in much higher than what they would have expected.” This feeling is part of an overall nervousness among investors about the long-term impacts of Trump’s unpredictable trade policy on markets.
Jeff Buchbinder, an analyst at LPL Financial, cautioned that historical trends suggest that “April showers likely won’t bring us May flowers.” He framed it with the historical warning slapping investors in the face—when in doubt, sell in May. That means higher turbulence for U.S. stocks ahead.
Howard Lutnick, CEO of Cantor Fitzgerald, on the record against Trump’s trade policy spread. He noted that during this term, “he’s trying to reset global trade,” which may present further challenges as companies navigate the shifting landscape.
The risk of continued volatility has led a number of investors to re-evaluate their approach going forward. John Higgins, chief market economist at Capital Economics, stated that “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 market observers look ahead, analysts like Kelly Bouchillon express caution regarding expectations for a swift recovery. “We don’t expect that it’ll be some sort of sudden recovery unless all of a sudden the tariffs are all removed.” This view highlights that we continue to live in a world of unprecedented uncertainty around capital markets and economic policy.