Inside the historic $8 trillion market comeback
By Matt Egan, CNN
New York (CNN) — In early April, Wall Street threw a temper tantrum that would make a toddler proud.
Fearing President Donald Trump’s chaotic trade war would ignite a global recession, investors scrambled to dump US assets. The rare simultaneous selloff of both stocks and bonds reflected a serious loss of confidence in White House policy.
Then Trump changed his tune. The president paused so-called “reciprocal tariffs” for 90 days and later slashed tariffs on China, though many items still face higher tariffs than before the Trump administration.
US stocks reversed course, too, setting off a historic rally on Wall Street in the past month. The S&P 500 has now fully erased the year’s losses and gained nearly $8 trillion in market value since its April 8 lows. It’s a remarkable comeback that underscores palpable relief among investors and easing recession fears since Trump’s stunning reversal.
“The markets had a tantrum and stomped their collective feet and got what they wanted: Trump to back off,” Ed Yardeni, president of investment advisory Yardeni Research, told CNN in a phone interview. “Trump realized he was toying around with liquid nitroglycerine and that it was time to back off.”
‘A free-fall moment’
The early 2025 selloff was breathtaking in its speed and intensity.
It took just 22 days for the S&P 500 to close in correction territory, a 10% drop from its record highs in November — a fraction of the time it normally takes to get a correction, according to CFRA Research. The S&P 500 narrowly avoided plunging into a bear market.
“It was a free-fall moment,” said Kevin Gordon, senior investment strategist at Charles Schwab. “Investor sentiment got to panic levels.”
The recovery has been just as swift, the fastest since 1982.
It took 25 trading days to go to positive territory from down 15% on the year, according to Bespoke Investment Group. In times of gloomy sentiment, investors might spark speedy rebounds when they finally see a situation change.
“Investors think the worst is likely over and that the reason for the panic has largely been undone,” said Sam Stovall, chief investment strategist at CFRA Research.
The whipsaw action in markets underscores how hard it is for even the smartest minds on Wall Street to time markets. And why Nathan Rothschild famously said, “The time to buy is when there’s blood in the streets.”
Back to ‘extreme greed’ mode?
The CNN Fear & Greed Index of market sentiment signaled “extreme fear” among investors in April, crashing to three on a scale of one to 100. The gauge has since completely rebounded and is now in “greed” territory (and heading toward “extreme greed”).
The tech sector has largely led the rally after the Trump administration’s decision to exclude smartphones and other electronics from country-specific tariffs.
Apple (AAPL) and Amazon (AMZN) stocks have surged more than 20% apiece since the April 8 low. Nvidia (NVDA) has spiked more than 40%.
But the upswing goes broader than tech. Consumer discretionary, industrials, communication services and financials have all rallied on Wall Street in the past month.
Recession fears ease
Each time tariffs have been dialed back, forecasters have cut their odds of a recession.
The chance of a US recession is now less than 50%, according to JPMorgan Chase economists’ forecast, down from 60% in early April before Trump’s 90-day pause on country-specific tariffs.
Goldman Sachs now sees a 35% chance of a recession, down from 45% before the US-China breakthrough on trade. And recession chances on prediction platform Polymarket have plunged from 66% to 39%.
“There was a tremendous amount of anxiety about Trump’s tariffs causing turmoil and uncertainty and increasing the likelihood of a recession, not just in the US but on a global basis,” Yardeni said, adding that “Trump couldn’t afford to let this issue fester.”
And the odds of a recession don’t have to be zero for investors to pile back into stocks.
“If zero is knowing nothing and 10 is knowing everything, Wall Street nibbles at 3 and does full-blown buying at 5,” said Stovall.
Tariffs are still extremely high
Of course, the US economy is not out of danger.
US tariffs have still skyrocketed, just not as high as a few weeks ago. The average effective tariff rate stands at 17.8%, the highest since 1934, according to The Budget Lab at Yale.
US tariffs on China are no longer at 145%, but they’re still elevated at 30%. That’s low enough to unfreeze trade but high enough to still cause price increases.
And no one knows exactly how those still-high tariffs will hit the US economy – not even the Federal Reserve.
“This is still relatively extreme trade policy,” said Schwab’s Gordon.
The White House argues the economic damage will be minimal. Many economists expect a burst of inflation and job loss, though the magnitude is very much up for debate.
Is the worst over for stocks?
The rapid recovery has spurred other investor concerns, and some worry the stock market rally is overextended.
“The market has raced from oversold to overbought in record time,” Mark Hackett, chief market strategist at Nationwide, wrote in a note on Wednesday. “That limits near-term upside unless we see a clear reacceleration in growth.”
Hackett said that without stronger growth and earnings, it will be difficult for US stocks to break out to new highs.
UBS warned on Wednesday that economic data is “poised to soften” in the coming months and that, in turn, US stocks could face a “modest headwind.” The bank has downgraded its stance on US stocks from “attractive” to “neutral,” cautioning that much of the good news has already been priced in and challenging news is likely on the way.
And a powerful rally does not guarantee the worst is over. CFRA’s Stovall notes that in two-thirds of all bear markets since World War II, the S&P 500 ultimately made even lower lows after recovering from double-digit percentage declines.
“There is still an awful lot of uncertainty out there. We have to wait and see if this rally has legs,” Stovall said.
The biggest X-factor is Trump himself and his evolving trade agenda. Markets remain one all-caps Truth Social post away from either a meltdown or a ferocious rally.
“This was a manufactured correction,” said Stovall, “and it could be remanufactured if the president wants to change his mind about things.”
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