Last week, I once again had the pleasure of presenting at a Commonwealth conference. As always, our advisors' questions were well thought out, thought-provoking, and covered a lot of ground.

April saw significant market fluctuations driven by tariff and interest rate concerns, with the Nasdaq showing a small gain while the S&P 500 and Dow Jones finished lower. Internationally, foreign stocks rebounded after initial sharp declines, resulting in positive overall performance for developed and emerging markets. Bond markets also experienced volatility, but the 10-year Treasury yield ended slightly lower, supporting bond prices for the fourth consecutive month. While there was earnings growth for the S&P 500, declining business and consumer sentiment raised concerns about future spending.

In this month's Market Observatory episode, Sam Millette and I discuss the dominating news story of the year: tariffs and trade policy. Uncertainty has weighed on markets and investors, and the on-again, off-again nature of these policies continues to change the range of outcomes for the economy and corporate earnings.

During periods of market volatility and declines, investors get concerned. They question their long-term objectives and whether they have more risk in their portfolios than they can tolerate. These are reasonable thoughts to have at times like these.

Last week, the S&P 500 was up 5.7%, the strongest week for the market since November 2023. The Nasdaq rose 7.3%, which was the best week for that index since November 2022. The rally was a result of President Trump’s announcement that he was pausing reciprocal tariffs for 90 days. And while there was no relief for China and the back-and-forth escalation between the two countries, markets latched onto the good news and rallied after a tough couple of months for equity investors. 

The markets are in the middle of a historic decline. Not so much in the magnitude—while we are approaching a bear market, these happen fairly regularly—but in the speed of the drop. We have rarely, if ever, seen this kind of a sudden decline, especially from close to record levels. People are nervous, of course, and understandably so. But that makes it even more important to take a step back and understand how we got here because that will inform where we are going.

At the start of last week, the S&P 500 rallied three days in a row, with investors believing that the tariffs announced on Wednesday would be targeted. But with increasing expectations comes the potential for disappointment. On April 2, the much-anticipated tariff announcements arrived—and investors did not like the news. President Trump announced 10 percent tariffs across the board on all imports from all other countries, excluding Canada and Mexico. Had that been the extent of it, the market’s expectations would most likely have been met. But it also included tariffs on countries identified as bad actors when it comes to trade, which included 34 percent tariffs on China, 24 percent on Japan, and 20 percent on the EU.

March was a tough month for U.S. stocks, as all three major indices were down for the month and quarter. Bonds performed better, as falling interest rates supported prices, and developed and emerging markets both ended the quarter positively. Hiring and inflation also improved, and the solid economic backdrop should keep driving earnings growth. Despite this, we continue to face uncertainty—including tariff concerns and weakening consumer confidence.

The first quarter of 2025 took investors on a rollercoaster, driven by on-again, off-again tariff policy announcements. From Election Day through February 19, 2025, the S&P 500 experienced a 5.7 rally, including a 3.9 percent increase to start the year. Tariffs were initially tempered from what had been discussed on the campaign trail, and investors focused on the pro-growth elements of the Trump administration agenda.

Last week, I had the pleasure of presenting at a Commonwealth conference. I love spending time and sharing ideas with our advisors. They are the best in the business.