Of course, the index at the heart of many 401(k) accounts is still more than 7% below its all-time high set earlier this year. And stocks could easily fall again as uncertainty remains high about what Trump’s tariffs will ultimately do to the economy. But the run for U.S. stocks back upward has been just as wild and unexpected as its fall. Here’s a look at what happened:
The severity of the U.S. stock market’s fall after Liberation Day surprised some market watchers. They had assumed Trump would backtrack on policies that hurt the Dow Jones Industrial Average. This is a president, after all, who crowed repeatedly during his first term about how the Dow was doing.
Trump himself said he had noticed how bond investors were “getting a little queasy” before he paused his tariffs.
The Federal Reserve cut rates three times at the end of 2024, but then implemented a pause of its own by keeping rates steady, in part to assess the impact of the Trump trade policy. The strong jobs report seemed to give the Fed clearance to keep rates where they are for now — despite Trump repeating his call for cuts — but the market is still looking for 3 cuts before the end of the year.
Through all the market’s tumult, U.S. companies have continued to deliver profit reports for the start of the year that have topped analysts’ expectations. Stock prices tend to follow profits over the long term, and that’s given the market a notable boost.
Trump’s off-again-on-again approach to tariffs had made this the most volatile period for the market since the onset of the pandemic. The pause is in its fourth week and the administration has yet to announce an agreement with any of U.S. trading partners. Based on his recent comments, Trump is still all-in on tariffs, so the pause could prove to be just that.
“We’ve already seen how financial markets will react if the administration moves forward with their initial tariff plan, so unless they take a different tack in July when the 90-day pause expires, we will see market action similar to the first week of April,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
