May There Be Hope

We survived a “roller-coaster” April, and in hindsight, of course we did. However, recall how many felt during some of the more stressful moments during April. That 15% drop from April 2 to intraday April 7 had more than a few nervous. From that intraday low, the S&P 500 is up approximately 22% as of filming.

For the month of April, the S&P 500 finished almost flat, just a little bit down – remarkable.

If you had checked the market on March 31, then gone to, let’s say, the Galapagos Islands – maybe the last place left where one doesn’t have cellular service, at least, in my experience – and then come back on April 30, and checked the markets, it would have been easy to think it had been a ho-hum month. But for those of us with cellular and constant internet service, it was far from that. But it is nice to see that holding steadfast again proved to be a wise strategy.

Chart 1, 1:09— Recall this chart from last month. We repeat it only because it is so important, and too often counterintuitive. Moving to the sidelines until "things settle down" is not a successful strategy. Recall that we pointed out that most of the strong, quick moves up come during periods of volatility and concern. Now, none of the days in April will make the top 10 list here, but that 22% move from the intraday low is significant.

Chart 2, 1:38— You’ve heard us state often that time is your ally when investing in risk assets, like stocks.

Looking at the two S&P charts here, one measuring a rolling 5-year return, the other a 10-year as of April 30, what jumps out is, of course, the 106% cumulative return over a 5-year period, and the 219% cumulative return over the 10-year period.

We’ll take it, right? But there were periods where reducing risk felt like the right thing to do, even during these periods.

After all, we experienced a 9% drop in late 2018, the frightening 33% drop in the first quarter of 2020, 2022’s 18% contraction, the 10% drop in mid-2023 and the nearly 10% pullback in August last year. So, our resolve was tested many times over these successful time periods. Anyway, some perspective as we navigate the current environment together.

Now, don’t go telling everyone that Charles claims it’s all “rainbows, unicorns and free chocolate chip cookies” – there’s plenty of potential worry out there still.

Here’s where we are, and what we’re watching. The tariff picture has improved considerably since Liberation Day. Recently announced deals with the U.K. and China have been well received.

China and the U.S. agreed to create a mechanism for further talks led by U.S. Treasury secretary Scott Bessent. The de-escalating tone is very welcomed. However, this is still an evolving situation with ample opportunity for further disruption, and there are other deals that need to be reached.

The geopolitical picture added another concern as India and Pakistan rekindled their long-running conflict. A ceasefire between the two nuclear-armed powers appears to be holding for now.

U.S. corporate earnings continue to grow in the low double digits – that’s good news. And a slew of economic data is due over the next few days, and we will be closely watching for any signs that the recent distress has negatively impacted the U.S. economy, and by how much.

For now, may there be hope that the recent relatively positive developments stick.