Inside the historic $8 trillion market comeback
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.'
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.'
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.
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.
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.
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.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Forbes
30 minutes ago
- Forbes
250 Million Acre Public Land Sale Would Ruin The Off-Road Industry
Ford Performance at the 2025 King of the Hammers in Southern California's Johnson Valley. Since President Trump took office in January, the amount of threats to anything considered public—from a large slice of our nation's workforce to the media—have been unrelenting. Earlier this month, these threats took on a new form: potentially robbing the American people of millions of acres of public land. Unveiled on June 11th and revised on the 14th, the Senate Energy and Natural Resources Committee's budget reconciliation bill outlines over 250 million acres, to be slightly more exact, that could be offered up for sale to private business. As reported on by Jonathon Klein of Ride Apart, this could have a tremendous negative impact on not just our natural resources, but every corner of the outdoor industry as well. For those amongst us who enjoy off-road driving (or hiking, camping, fishing, hunting, cycling, climbing, etc.), the possibility of being cut-off from lands where we savor such activity is very real. Klein points out one particular swath of land in Southern California, Johnson Valley—home to one of the world's top off-road racing events, King of the Hammers—is on the chopping block, which would not only be detrimental to this event, but every single industry that's involved in it. Automakers, the aftermarket performance and racing industries, tourism, general outdoor equipment industries; the list goes on. Take that same scenario and multiply it by every other parcel of land that outdoor enthusiasts could lose access to, and the damage would be extensive. For a good overall picture of what's on the chopping block, The Wilderness Society has created a handy map. Competitors at the 2020 King of the Hammers in Johnson Valley, California. But why is all of this land potentially for sale? As stated in the bill itself, as much as $15 billion in revenue could come from expanded oil, gas, coal, and geothermal leasing. Other aims include increased housing production, domestic energy security and timber production, as well as, in the bill's summarized words, 'ensuring states and counties benefit from energy projects on federal lands.' The Wilderness Society has also outlined a handful of counter arguments. In its words, 'research suggests that very little of the land managed by the BLM (Bureau of Land Management) and USFS (US Forest Service) is actually suitable for housing.' It also explains that the federal government can revoke national monument status and that certain changes would negatively impact sovereign Tribal Nations. We can't forget the fact that increased energy production carries its own environmental hazards, too. It's all bad and very unnecessary. One thing that truly makes America great is its beautiful natural land that's here for all of us to savor, and this bill could cut off a very significant portion of it. And again, there's the immense adverse effect on every single outdoor industry, especially off-road driving and racing, and the massive amount of American companies that feed it. Contact your US senator and let them know how you feel. Especially if you live in Utah, which is Senator Mike Lee's turf. He's Chairman of the Senate Committee on Energy and Natural Resources and the creator of this bill—ironically, as many as 18 million acres of his state's land could potentially be up for sale. That's a lot of territory for off-road driving, hunting, shooting, fishing, climbing, camping, hiking, mountain biking, and so on.
San Francisco Chronicle
36 minutes ago
- San Francisco Chronicle
Supreme Court delivers another blow to California's imperiled emissions standards
The Supreme Court reinstated legal challenges by oil and gas companies Friday to California's strict emissions standards for motor vehicles, standards that the Trump administration is likely to halt on its own in the near future. Federal law allows California to set tighter limits on auto emissions than the national standard, and since 1990 has allowed other states to adopt California's rules, an option taken by 17 states and the District of Columbia. But fuel companies affected by the increasing use of electric vehicles contend the state's standards are too restrictive and have sued to overturn them. Lower federal courts ruled that companies had failed to show they were being harmed by the standards, and therefore lacked legal standing to sue, because electric car sales are increasing for other reasons. The Supreme Court disagreed in a 7-2 decision. 'The whole point of the regulations is to increase the number of electric vehicles in the new automobile market beyond what consumers would otherwise demand,' Justice Brett Kavanaugh wrote in the majority opinion. 'The government generally may not target a business or industry through stringent and allegedly unlawful regulation, and then evade the resulting lawsuits by claiming that the targets of its regulation should be locked out of court.' But dissenting Justice Ketanji Brown Jackson said lawyers in the case had told the court that the Environmental Protection Agency, under President Donald Trump, was about to withdraw its approval of California's waiver from nationwide standards, 'which will put an end to California's emissions program.' The EPA took that action during Trump's first administration, which was reversed under President Joe Biden. Meanwhile, legislation passed by the Republican-controlled Congress and signed by Trump would prevent California from banning sales of new gasoline-powered vehicles in 2035, a law the state has challenged in court. The Supreme Court 'is already viewed by many as being overly sympathetic to corporate interests,' and Friday's ruling 'will no doubt aid future attempts by the fuel industry to attack the Clean Air Act,' said Jackson, a Biden appointee. In a separate dissent, Justice Sonia Sotomayor said the court should have returned the case to a lower court to await the EPA's action. Kavanaugh, however, said fuel companies affected by California's current standards could seek to prove in court that they were arbitrary and unlawful. His opinion was joined by Chief Justice John Roberts and Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, Amy Coney Barrett and Elena Kagan. Liane Randolph, chair of the California Air Resources Board, said it was not a full-scale rejection of the state's emissions standards. 'This ruling does not change California's Advanced Clean Cars rulemaking, nor does it dispute what data has shown to be true: vehicle emissions are a huge source of pollution with grave health impacts, consumer adoption of zero emission vehicles continues to rise, and global auto manufacturers are committed to an electric future,' she said in a statement. But attorney Brett Skorup of the libertarian Cato Institute said the ruling was 'a welcome rebuke to judicial gatekeeping' and affirmed that 'predictable economic harms from government regulation' entitle 'injured parties (to) have their day in court.' The case is Diamond Alternative Energy v. EPA, No. 24-7.
San Francisco Chronicle
36 minutes ago
- San Francisco Chronicle
ICE to convert shuttered California prison into state's largest migrant detention center
A sprawling 2,560-bed facility in the high desert town of California City (Kern County) is poised to become the largest migrant detention center in California under a new agreement between Immigration and Customs Enforcement and private prison contractor CoreCivic. Ryan Gustin, the company's senior director of public affairs, told the Chronicle on Friday that CoreCivic has 'begun some preliminary activation activities, pursuant to a letter agreement with our government partners at U.S. Immigration and Customs Enforcement.' According to the Los Angeles Times, the federal government entered into a six-month contract with CoreCivic, with $10 million in 'initial funding.' The facility operated as a state prison until March 2024, when California ended its lease as part of an initiative to eliminate the use of private prisons. The move comes amid a national push by the Trump administration to expand ICE detention capacity from 41,500 to 100,000 beds nationwide. Citing a 'compelling urgency,' ICE has bypassed standard competitive bidding procedures, opting instead for expedited, no-bid contracts with major private contractors such as CoreCivic, the Associated Press reported. 'Never in our 42-year company history have we had so much activity and demand for our services as we are seeing right now,' CoreCivic CEO Damon Hininger said during an earnings call with shareholders last month, citing the company's general business. A recent report from the California Department of Justice listed six active federal immigration processing centers in the state, all run by private companies. Two of the facilities are in Kern County and run by GEO Group, a CoreCivic competitor. They include the Mesa Verde center in Bakersfield and the Golden State annex in McFarland. GEO Group also operates two additional centers in Adelanto, a desert city in San Bernardino County. As of late May, California held nearly 3,200 migrants in detention, ranking third nationally, behind Texas and Louisiana. The addition of the California City facility is expected to increase the state's detention capacity by 36%. California City Mayor Marquette Hawkins acknowledged potential economic benefits, including an estimated 550 new jobs. 'However, we understand that 40% of our residents are Latino,' Hawkins told the Californian. 'We want to make sure there is fairness there. We talked about oversight and my office having the ability to do that.' Originally built by CoreCivic (then known as Corrections Corporation of America) in 1999 for $100 million, the facility first housed federal inmates. It was later leased to the California Department of Corrections and Rehabilitation, which operated it as a men's prison for nearly a decade until late 2023. Although the lease officially extended through March 2024, state inmates were relocated earlier. A new sign now identifies the site as the 'California City Immigration Processing Center.' According to Tehachapi News, about 50 vehicles were observed in the parking lot Wednesday afternoon. As of Friday morning, CoreCivic's website listed several job openings at the California City site, including a managerial role with a salary of $81,265 and 13 health care positions. Critics continue to raise alarm over the increasing role of private corporations in immigration enforcement. Advocacy groups, including Californians United for a Responsible Budget — a coalition of more than 100 organizations supporting prison closures — urged Gov. Gavin Newsom to take steps in the 2025-26 state budget to prevent shuttered state prisons from being repurposed for ICE detention. The coalition called on Newsom to fully decommission all 'warm shutdown' facilities — prisons that, while inactive, remain staffed and maintained — arguing they continue to drain state resources and remain vulnerable to federal takeover.
