Imagine falling asleep on March 31st, 2025, and waking up May 1st. You stretch, yawn, rub your eyes… and check the markets. To your surprise, you’d think nothing much happened. The Dow dipped just 3%, and the S&P and Nasdaq were essentially flat for the month.

 

But don’t be fooled by the sleepy surface—April was anything but quiet.

 

Early in the month, the U.S. government shook things up by launching new tariffs on countries with large trade surpluses. That sparked fears of stagflation, as some economic indicators flashed mixed signals. Global services PMI rose, but ISM manufacturing PMI dropped. New orders slowed, and unemployment crept into concerning territory.

 

But here’s something for us to remember: consumers don’t bear all the tariff burden. It’s actually spread across five areas:

Despite the tariff noise, March consumer prices declined 0.1%—a calming twist.

 

Market fear was high, with the VIX elevated. Historically, that’s not always bad news. When the VIX spikes above 40, the S&P 500 has averaged 30%+ gains over the following year. Lower VIX levels? Less impressive returns. As strange as it sounds, fear often signals opportunity.

 

Mid-month, President Trump scaled back reciprocal tariffs to 10% (except for China) after the bond market showed signs of stress—narrow spreads, low liquidity, and a quick jump in the 10-year Treasury from 4.01% to 4.49%. That prompted President Xi to say China’s open to new trade talks.

 

Meanwhile, Fed Chair Jerome Powell reminded everyone the Fed’s in no rush to cut interest rates… but analysts are betting on up to four cuts this year. The CME FedWatch tool even sees a potential full percentage point cut by year-end.

 

Yes, we’re likely heading into a recession—but we’ve been expecting this. Businesses already stocked up in Q1 ahead of tariffs, and uncertainty is the market’s least favorite thing.

 

Consumer confidence took a hit, dropping to a five-year low. Job openings fell, and the housing market cooled, with home prices rising just 0.1% (below the 0.3% forecast).

 

Here’s some good news: Earnings are rolling in stronger than expected. Of the 286 companies reporting so far, 75% beat expectations, with Q1 earnings up 7.3% year-over-year.

 

Rip Van Winkle may have missed a whirlwind April, but you don’t have to sleep through what’s next. With volatility up and sentiment down, contrarians may see opportunity. As the saying goes: It’s always darkest before the dawn.

 

Stay sharp, stay steady—and maybe just nap with one eye open.

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