April Market Commentary

April Market Commentary

April was a month that felt longer than 30 days. It opened with a jolt and closed with cautious optimism, bookended by tariff headlines that dominated investor sentiment and market behavior. Volatility was elevated, sentiment took a hit, and asset prices moved sharply—first down, then up—as policymakers and investors struggled to adjust to a rapidly changing policy environment. The good news: diversification helped many portfolios weather the storm better than the headlines might suggest.

Tariffs Ignite Fear and Market Turmoil

The month began with a shock on April 2—dubbed “Liberation Day” when the Trump administration announced a sweeping and unexpectedly aggressive round of tariffs: a 10% baseline on most imports and a 34% levy on Chinese goods. Within days, a rapid-fire escalation unfolded that felt more like a geopolitical firefight than a trade negotiation.

China retaliated on April 10 by raising its tariffs on U.S. imports to 84%, and the U.S. responded immediately by hiking total tariffs on Chinese goods to an extraordinary 145%, combining a new 125% tariff with earlier fentanyl-related duties. On April 11, China countered once more, lifting its tariffs to 125%.

The speed and scale of these tit-for-tat moves triggered widespread anxiety across corporate boardrooms, consumer sentiment surveys, and financial markets. It felt like a global trade war was erupting in real time.

The market’s reaction was swift and severe:

• The S&P 500 (1) fell 7.7% from its February 19 peak.
• The Nasdaq (1) and Russell 2000 (1) officially entered bear market territory, each falling more than 20%.
• The VIX—the market’s “fear gauge”—spiked to its highest level since the early days of the COVID pandemic.
• Bond yields surged, with the 10-year Treasury jumping over 50 basis points to 4.58% by April 11, and the 30-year yield topping 5%.

This sell-off, while dramatic, was fundamentally different from prior crises. It was not triggered by systemic risk or a global event, but by policy, a human decision that remains subject to change.

A Swift Policy Pivot

Policy changes came faster than expected as the administration displayed a willingness to compromise (maybe the message from the markets enhanced that willingness!). On April 9^th, the administration announced a 90-day pause on reciprocal tariffs (excluding those on China) and floated the possibility of exemptions. Markets responded with one of the sharpest single-day rallies since World War II: the S&P 500 (1) rose 9.5%.

The pivot continued through mid-April. Treasury Secretary Bessent hinted at a more measured trade policy, focused on revenue generation and future tax relief. On April 22, Trump backed away from threats to remove Federal Reserve Chair Jerome Powell, contributing to a rebound in the U.S. dollar and signaling a more conciliatory stance.

Still, the Fed opted to hold rates steady, citing uncertainty about inflation stemming from the effects of tariffs, and reiterated its wait-and-see approach. Markets, however, are increasingly expecting the Fed to cut rates as economic data begins to soften.

In the second half of April, optimism grew that negotiations could lead to favorable outcomes. China removed its retaliatory tariffs on U.S. semiconductors and aircraft parts. The administration suggested that trade deals with at least 17 nations, including Japan, India, and South Korea, could be finalized in the coming weeks.

While uncertainty remains, the possibility of lower effective tariff rates has brightened the outlook for sectors that had borne the brunt of the initial selloff, such as mega-cap tech, energy, and small caps. Forward-looking market participants have started to price in the potential for reduced trade friction and improved economic clarity in the months ahead.

On the 80^th anniversary of VE Day, May 8th, the first reciprocal trade deal with the UK was announced. An initial meeting with China is reportedly scheduled for Saturday, May 10^th. All eyes will be on these and negotiations with other trade partners in the coming weeks and months.

Diversification Proves Its Value Again

Periods like April are stark reminders of why we diversify.

• Defensive sectors like consumer staples, utilities, and healthcare held up better than the broad market.
• International equities outperformed U.S. counterparts.
• Bonds, while volatile, continued to provide income and stability, with municipal bonds attracting strong interest due to favorable yields and tax treatment.
• Meanwhile, some of the hardest-hit assets were those previously leading the charge, especially tech-heavy growth names that had dominated recent performance.

Clients with diversified portfolios benefited from smoother performance and avoided the full impact of concentrated risk exposure. Just as importantly, diversified investors tend to stay invested, positioning themselves to participate in recoveries when they inevitably come.

Fog of Policy Lifts

While the “fog of trade war” still clouds earnings visibility and near-term economic projections, markets appear to be moving beyond the worst of tariff uncertainty.

The labor market is softening, inflation data is relatively tame, and there is growing pressure on the Fed to cut rates. Recession remains a possibility, but in our view a likely mild one should occur given the strength of corporate and consumer balance sheets and the continued resilience of labor markets. And while political rhetoric may remain heated, investors are increasingly focused on policy outcomes rather than soundbites.

As Jeremy Siegel recently advised: “Don’t try to time the market—diversification works.” We couldn’t agree more.

Our Value to You

At Waterworth Wealth Advisors, we help our clients see beyond today’s headlines. Our disciplined approach focuses on tax-smart, cost-effective, risk-managed portfolios which help you navigate uncertainty with clarity and confidence. We’re here to keep your plan on track, your investments aligned, and your questions answered.

What’s Coming Up

We’re excited to launch our NextGen Series this summer—an educational initiative designed for clients’ adult children and grandchildren (ages 22–40). The program includes webinars, financial tools, and personal consultations to help the next generation build smart financial habits and prepare for life’s major decisions.

Save the date, July 13^th! Be our guest for a theatrical production of AMON! at the Palace Theatre in Grapevine. Join us to meet “Amon G. Carter Sr.”, the larger-than-life Texan who championed Fort Worth as a hub of industry, media, and Western culture. From founding the region’s dominant newspaper and launching the first radio and TV stations in Texas, to bringing American Airlines to town and helping create Big Bend National Park, Amon’s fingerprints are all over modern Texas. His legacy lives on not only in business and education but in art and civic pride, making him a figure well worth knowing.

Final Thoughts

Market volatility will always be a part of our lives. What matters most is how we respond. If recent market swings have made you uneasy or curious about how your plan is positioned, let’s talk. We’re always here to listen, answer questions, and help you move forward with confidence.

Your April portfolio reports have been posted to your eMoney vault, and we will be contacting clients to schedule reviews and check in. If you have something you’d like to discuss, please don’t hesitate to reach out or schedule a meeting at your convenience.

Thank you for your continued trust!

____________________________________________________________________________________

1. The Dow, NASDAQ, S&P 500, and Russell 2000 – are unmanaged groups of securities considered to be representative of the stock market in general