Monthly Market Update – April 2025

Key Takeaways

• A TALE OF TWO MONTHS The S&P 500 Index declined a modest -0.8% in April but there was nothing subtle about the path to that slight decline. The month included a 4-day -12% decline followed by a stunning one-day +10% rally. But in the second half of the month volatility subsided and stocks steadily climbed to almost get back to even (and did recover their losses by May 2).
• STAYING INVESTED WHEN VOLATILITY REIGNS Tariff policy uncertainty in April drove heightened market volatility and record trading volumes. Roller coaster markets like that are incredibly uncomfortable for investors, but staying invested and diversified in such times is crucial for capturing the market’s long-term average returns.
• GDP GROWTH STALLING The U.S. economy contracted in the first quarter of 2025, with GDP shrinking at a -0.3% annual pace, slightly below Wall Street’s expectations. This decline was largely due to a surge in imports ahead of new tariffs. Without the effort to front-run tariffs GDP would have been positive. 
• LABOR MARKET STILL GROWING Days after GDP surprised to the downside, jobs growth surprised to the upside. Despite the tariff turmoil, April Non-Farm Payrolls (NFP) increased by 177,000, surpassing Wall Street’s forecast of 138,000. Importantly, private sector jobs were also higher than expected.
• EARNINGS STILL GROWING With about 70% of S&P 500 companies having reported their first-quarter earnings, results have exceeded expectations. Approximately 76% of companies reported Earnings Per Share (EPS) above estimates, above the 10-year average. Overall, earnings are growing at a +12% annual growth rate, double the +6% growth rate expected.
• INFLATION STILL FALLING The cost of goods and services continued to decelerate in March. The Personal Consumption Expenditure (PCE) Price Index was flat and after removing food and energy the Core PCE Price Index, was still unchanged. Moreover, other key inflation indicators like the CPI, PPI, and Import Prices all declined in March, a rare occurrence not seen since April 2020.

Market Summary

Asset Class Total Returns

Source: Bloomberg, as of April 30, 2025. Performance figures are index total returns: US Bonds (Barclays US Aggregate Bond TR), US High Yield (Barclays US HY 2% Issuer-Capped TR), International Bonds (Barclays Global Aggregate ex USD TR), Large Caps (S&P 500 TR), Small Caps (Russell 2000 TR), Developed Markets (MSCI EAFE NR USD), Emerging Markets (MSCI EM NR USD), Real Estate (FTSE NAREIT All Equity REITS TR).

Market Volatility and Tariff Impacts

The U.S. stock market faced significant turbulence in April 2025, driven by uncertainty over President Trump’s tariff policies, which sparked historic volatility in stock and bond markets during the early days of the month. In the Tale of Two Months section below, the immense and intense up-and-downs of U.S. stocks is detailed. Suffice it to say, the tariff drama drove intraday swings not seen in years. However, in the second half of the month volume and volatility subsided, and the S&P 500 Index steadily climbed and ultimately closed the month with a mere -0.8% dip. And the volatility wasn’t limited to stocks; bond markets saw a spike in Treasury yields with the benchmark 10-year U.S. Treasury yield to nearly 4.5% by April 11 despite starting the month at about 4.0%. They gradually fell back under 4.3% by month end which helped the Bloomberg U.S. Aggregate Bond Index eke out a +0.4% gain, its fourth consecutive positive month.

Sector Performance and Global Markets 

While the broader U.S. market struggled, S&P 500 Technology and Communication Staples sectors showed resilience, rising +1.6 and +1.2% respectively, while Energy sank -13.7%, its worst month since June 2022, and Health Care dropped -3.7% due to policy uncertainty. Outside the U.S., markets were mixed: European equities (MSCI Europe ex U.K. Index) were up +5.1%, rallying for the third time in four months, while Japanese equities (MSCI Japan Index) were up +5.2%, their fourth positive month in the last six. The MSCI Emerging Markets Index was up +1.3%, its fourth consecutive positive month. In contrast, the MSCI China Index was down -4.6% in April.

Economic Reports and Investor Sentiment

Overall, the economic outlook remained mixed but mostly solid. Inflation fears grew despite actual inflation for March dropping (see Inflation Still Falling below). April ISM Manufacturing exceeded expectations but remained in contraction territory at 48.7 (levels under 50 signal contraction), while ISM Services activity for April beat expectations and pushed higher into expansion territory at 51.6. Meanwhile GDP growth for the first quarter stalled, although it was entirely due to a surge in imports as businesses raced to front run tariffs (see GDP Growth Stalling below for more detail). The labor market remains resilient with April new Nonfarm Payrolls totaling 177,000, topping Wall Street forecasts for 138,000. In contrast to the hard economic date, soft economic data continues to be noticeably weaker. Consumer Sentiment for April fell to 52.2 from 57.0 in March, while Consumer Confidence dropped to 86.0 from 93.9 the prior month – its fifth straight decline.

Source: Bloomberg. Data as of April 30, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Quick Takes

A TALE OF TWO MONTHS

The first quarter of 2025 was a bumpy ride for investors… but apparently it was just a warmup for April and the start of the second quarter. U.S. stocks (the S&P 500 Index) were only negative for three months (April, October, and December) in calendar year 2024, yet we’ve just experienced three consecutive down months in the first four months of 2025. Of course, February’s loss was a scant -1.4% dip and April was a barely negative -0.8%, so relatively modest losses. And given the month that April was, that meager decline felt like a victory. April truly was a tale of two months, in which the first half of the month had a quick, ferocious -12.4% 4-day decline that nearly put the S&P into bear market territory (defined as a -20% decline from the all-time high). That was spurred by President Donald Trump’s widely anticipated post-market-close announcement of sweeping new tariffs that surprised markets by coming in significantly higher, and broader, than expected. According to Dow Jones Market Data, $7.7 trillion in market value was lost during the 4-day stretch, the largest 4-day loss on record. Now one of the biggest paradoxes in investing is that the biggest market gains often occur along with the largest market declines. And true to form, that 4-day -12.4% loss was followed by a one-day +9.9% gain on April 9. That was the biggest one-day advance since 2008. The sharp reversal higher came after President Trump authorized a 90-day pause on reciprocal tariffs (for all trading partners except China). Those 5 days of April covered the bulk of the month’s volatility as the choppy back-and-forth continued in a narrow range for the next two weeks, until the final week saw a slow and steady drift higher to close just -0.8% from where the month opened!

April 2025: A Tariff-Driven Tale of Two Months

S&P 500 Index (April 1 through April 30)

Source: Bloomberg, E*TRADE.

STAYING INVESTED WHEN VOLATILITY REIGNS

As discussed above, and illustrated in the accompanying graph, all the uncertainty around tariff policy and potential trade wars resulted in greatly amplified levels of intraday market volatility and record high trading volumes. Circumstances like this, whether policy uncertainty, geopolitical events, natural disasters, or old-fashioned financial crises, always create a wide range of potential outcomes that make investing very uncomfortable. But against these backdrops, investors must remind themselves that this is the price of admission to attain the market’s long-term average returns. Staying invested, remaining diversified, and, if possible, taking advantage of opportunities at attractive entry points is important to improving the probability of success over the long term. Goldman Sachs points out that returns are driven by just a handful of days every year. In fact, since 1990, missing the 10 best trading days each year would have turned the S&P 500’s positive returns of +10.6% into annual losses of -13.2% on average. Successful investors need to be patient enough to participate throughout a market cycle and diversified enough to withstand drawdowns.

Successfully Navigating Market Volatility by Staying Invested

S&P 500 Index calendar year returns (2010 through 2024)

Source: Bloomberg and Goldman Sachs Asset Management. As of December 31, 2024.

GDP GROWTH STALLS

On April 30, the Bureau of Economic Analysis (BEA) released the advanced estimate for Gross Domestic Product (GDP) for the first quarter. It showed that the U.S. economy contracted for the first time in 3 years as real Gross GDP shrank at a -0.3% annual pace for the quarter. That was slightly below the -0.2% annual rate Wall Street was expecting and down from the +2.4% annual pace in the fourth quarter of 2024. A decline in the headline number was anticipated because of a surge of imports ahead of the Trump administration’s tariffs. Indeed, Net Exports were a -4.8% drag on headline GDP growth due to a massive +41% increase in Imports (which detract from GDP). However, Real Final Sales to domestic purchasers, which exclude International Trade and Inventories, rose by a solid +2.3%, highlighting the material negative impact Imports had on GDP. Also detracting from 1Q-2025 GDP was Government Spending, which fell -1.4%, driven by a -5.1% decline in Federal Spending. Government Spending hadn’t declined since 2Q-2022 and has been above average in contributing to GDP for the last several quarters. Importantly, Private Investment surged +21.9%, although that data is also distorted by a spike in Inventories ahead of tariffs. Business Investment rose +9.8%, while Residential Investment rose a mild +1.3%.  Another positive aspect beneath the headline GDP number was Personal Consumption, which was +1.8%. Although that is down from +4.0% from the prior quarter, it was above Wall Street forecasts for a +1.2% increase. The bottom line of the report is that there was obvious frontrunning of the tariffs, suggesting that subsequent GDP data could reverse higher. That’s exactly what happened the last time GDP declined in 1Q-2022, which was followed by a +0.3% annualized rise in 2Q-2021.

GDP Declined as the Economy Braced for Tariffs

Decline almost entirely due to the front-running of imports ahead of tariffs

Source: Bloomberg.

LABOR MARKET STILL GROWING

In the wake of all the tariff turmoil, and just two days after the GDP report on May 2, the April Employment Situation Report showed just how resilient the U.S. labor market is. It showed that new Non-Farm Payrolls (NFP) totaled 177,000 during the month of April. That was down from 185,000 the prior month (which was revised lower from the originally reported 228,000), but it easily beat Wall Street forecasts for 138,000 payrolls. According to the Bureau of Labor Statistics (BLS) report, Health care continued to be a leader in job creation, adding 51,000 jobs. Wages grew in line with expectations with Average Hourly Earnings (AHE) slipping to +0.2% from +0.3% where they were expected to stay. From an inflation perspective, that is actually a positive. Year-over-year, AHE were up +3.8%, unchanged from the prior month, and below the +3.9% annual rate expected. The Fed would like to see wage growth slow to around +3% annually or less, a level it sees as consistent with low inflation. Labor-Force Participation was up a tick to 62.6% from 62.5% where it was expected to stay. April Private Sector Payrolls increased by 167,000, following 170,000 the prior month and 107,000 in February. March was the first time since the last Trump administration in which there were two consecutive months of private sector payrolls increasing while government sector jobs decreased. The bottom line from the report is that job growth was stronger than expected again, including private sector jobs, despite the volatility in the market associated with the tariff uncertainty.

Payroll Growth Exceeds Expectations Again in April

Monthly job creation (Jan 2022 – April 2025)

Source: U.S. Bureau of Labor Statistics via FRED, CNBC.

EARNINGS STILL GROWING

With about 70% of the companies in the S&P 500 having reported their corporate profit results for the first quarter earnings season, results have been better than expected. According to FactSet, about 76% have reported actual Earnings Per Share (EPS) above estimates, which is below the 5-year average of 77% but above the 10-year average of 75%. In aggregate, companies are reporting earnings that are 8.6% above estimates, which is below the 5-year average of 8.8% but above the 10-year average of 6.9%. And as shown in the chart below from Goldman Sachs, the aggregate results thus far are tracking at about a +12% annual growth rate, twice the expected +6% growth rate coming into the quarter. Yes, forward guidance by the companies reflects an elevated level of uncertainty but to have a double-digit earning growth with little over a quarter of companies left to report is a tailwind for stocks and has contributed to the strong rebound in stock prices in late April.

S&P 500 Earnings Scorecard (2022 – 2026)

S&P 500 Quarterly Year-over-Year EPS Growth Relative to Consensus Expectations.

Source: U.S. Bureau of Labor Statistics via FRED, CNBC.

INFLATION STILL FALLING

The cost of goods and services was unchanged for the month of March, matching expectations, and a decrease from +0.4% the prior month. For the year the Personal Consumption Expenditure (PCE) Price Index was up +2.3%, above expectations for +2.2%, but down from the +2.7% annual rate the prior month (revised higher from +2.5%). The Core PCE Price Index, which excludes the more volatile food and energy groups, and is the Fed’s preferred inflation gauge, was flat for the month, and under expectations for +0.1%. That was down sharply from +0.5% the prior month. Year-over-year, the Core-PCE Price Index was up +2.6%, matching expectations, and down from +3.0% the prior month. Other more familiar inflation gauges were also subdued in March. The Consumer Price Index (CPI) was -0.1%, the Producer Price Index (PPI) was down -0.4%, and the Import Prices Index slipped -0.1%. Bespoke Investment Group notes that March was the first time all three inflation measures fell in the same month since April 2020. Since the start of 2010, there have been only 14 other months in which all three inflation indicators have declined in the same month. And with the price of oil under $60 a barrel (down -19% in April, the biggest monthly drop since 2021), any potential tariff-induced inflation will have a lot to offset to reverse the trend higher.

Inflation Slowed Further in March

By any measure inflation was distinctly down in March

Source: Bureau of Economic Analysis, Federal Reserve Banks of Cleveland and Dallas, Haver Analytics; Chart: E.J. Antonia, Ph.D.

Asset Class Performance

The Importance of Diversification. Diversification mitigates the risk of relying on any single investment. It offers many long-term benefits, such as lowering portfolio volatility, improving risk-adjusted returns, and helping investments to compound more effectively.

Source: Bloomberg.

Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “60/40 Allocation” is a weighted average of the ETF proxies shown as represented by: 30% US Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Chris Bouffard is CIO of The Retirement Planning Group (TRPG), a Registered Investment Adviser. He has oversight of investments for the advisory services offered through TRPG.

Disclaimer: Information provided is for educational purposes only and does not constitute investment, legal or tax advice. All examples are hypothetical and for illustrative purposes only. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed. Please contact TRPG for more complete information based on your personal circumstances and to obtain personal individual investment advice.