Periodically, markets remind us that gains are not linear and there will be times we need to endure a bit of pain (metaphorically speaking) in our pursuit of long-term market returns.
April was one of those months, with the S&P 500 Index declining -11.52% from April 2nd though April 8th before recovering over the next 22 days to close out the month with only a -1.05% loss.
That was a gut check moment. A time when the headlines feel loud, the numbers feel sharp, and your instincts may start to question your plan. Given advice not to panic during severe market downturns can feel a little cliché, but it is one of the most important pieces of financial advice we can offer.
As we have learned repeatedly, markets always recover in time and as long-term investors we’re armed with the two most powerful forms of market kryptonite -time and experience.
Despite the recent equity rally, the S&P 500, Dow 30, and Nasdaq Indices are all still negative year to date at -3.29, -2.76 and -7.16% respectively. Again, after two years of 20+% returns on the S&P 500 Index, we knew 2025 would be a more challenging year -which, so far has been an understatement.
Please know though, we are still optimistic and do maintain our positive single digit year end S&P 500 Index return target of 5-9%. Below are four core reasons that support our view;
- Optimism about trade and tariffs. The White House has signaled progress on deals with several countries, including India, South Korea, Japan, and cemented the first trade deal with the U.K. yesterday. President Trump has also hinted at reductions in China’s tariffs, while Treasury Secretary Scott Bessent will meet with senior Chinese trade officials in Switzerland tomorrow (Saturday the 10th)
- Resilient economic fundamentals. The U.S. economy added 177,000 new jobs in April, keeping unemployment low at 4.2%. Consumer spending grew 1.8% in inflation-adjusted terms in the first quarter, while business investment surged over 20% annually — bright spots that were overshadowed by concerns about the 0.3% dip in gross domestic product (GDP) caused by surging pre-tariff imports. A rebound in second-quarter GDP should prevent consecutive quarters of contraction.
- Easing inflation delayed but still coming. While tariffs may slow further improvement, we and the markets expect inflation to resume its downward trend toward the Federal Reserve’s (Fed) 2% target by 2026. Falling oil prices and declining long-term Treasury yields since January are also helping.
- Strong corporate profits. S&P 500 firms are on track for over 13% first-quarter earnings growth, roughly double expectations when earnings season began. Leading technology companies have reaffirmed or increased capital spending plans despite trade uncertainty, committing to a more than 30% increase in 2025 over 2024, underpinned by confidence in the potential payoffs of artificial intelligence.
Tactically, from a portfolio management perspective, we have and will continue to rebalanced accounts where needed and are deploying cash as efficiently as possible across both our equity and bond positions -while trying to avoid catching any falling knives.
Given the unpredictability of our current fiscal, monetary, and geopolitical climate we should continue to be prepared mentally and emotionally for more months like April for the remainder of 2025.
As always, we wish you and your family a great Friday evening, and a wonderful weekend!
Please reach out to us with any questions or comments you may have regarding your specific situation.
Jaran C. Day, Chief Investment Officer
Griffin Dalrymple, CFP®, Chief Strategy Officer
Past performance is not indicative of future performance.
The views expressed represent the opinion of Opinicus and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Opinicus’s view as of the time of these statements. Market performance cited is not indicative of portfolio performance experienced by portfolios Opinicus manages. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.