President Donald Trump's "Liberation Day" tariff announcement sent financial markets on a wild roller-coaster ride in April. The broad U.S. stock market nose-dived after Trump surprised Wall Street on April 2 with larger-than-expected tariffs on global trading partners.
Despite the most volatile period for stocks since the early days of the Covid pandemic, the S&P 500 narrowly averted an official bear market amid fears of an all-out trade war. The broad market gauge rebounded in late April with a seven-session winning streak to end the month down just 0.68% on a total return basis.
When the dust settled, the average U.S. diversified stock fund in April fell just 1.15%, after being down nearly 14%, according to Lipper Refinitiv data.
Scanning The Stock Market
The other broad U.S. stock market indexes finished mixed. The tech-heavy Nasdaq eked out a gain of 0.88%. The Dow Jones Industrial Average fell 3.17%. And the small-cap Russell 2000 tumbled more than 2%.
Chris Wolfe, chief investment officer at Pennington Partners, used an Ohio State football analogy to describe the stock market's roughly flat finish in April despite the extreme volatility along the way. "It was like three yards and a cloud of dust," said Wolfe. The big question, according to Wolf: "Did the thundercloud of dust signify anything else?"
If the world faces more sizable tariffs ahead, even if negotiations bring the current high levies down, investors will have to rejigger their spreadsheets and likely make adjustments to corporate profit estimates.
"What this comes down to from a market standpoint is everyone is going to deal with higher cost structures," said Wolfe. "(For many years), corporations globally have run their cost structures through very diversified global supply chains to be as skinny and as cheap as possible. That's all going away."
Stock Market Uncertainty Mounts
Higher costs add up to massive uncertainty that still has yet to be fully quantified by investors. Many U.S.-ordered tariffs went into effect in early April, and many countries countered with tariffs of their own targeting U.S. imports to their countries.
"For May, tariffs are expected to remain the main issue," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. A protracted global trade war is seen weighing on economic growth and reigniting inflation. Many Wall Street firms have upped the odds of recession due to tariff fallout.
On the final day of April, the government reported that U.S. GDP contracted 0.3% in the first quarter of 2025.
Still, better-than-expected quarterly earnings reports by Magnificent Seven stocks Microsoft and Meta Platforms were well-received by investors. Guidance from Meta CEO Mark Zuckerberg on continued strength in tech also buoyed investor sentiment.
Overseas Markets Shine
The big shift in market performance in April, partly in reaction to Trump's economic policies, is that foreign stock funds outpaced U.S. stock funds as investors moved capital out of the U.S. The dollar took a big hit as a result.
Global diversification paid off for fund investors in April. The average world stock fund rose 2.36%, outpacing the average U.S. diversified stock fund by 3.5 percentage points. Through April, the 5.76% gain of world stock funds trounced their U.S. diversified stock fund counterpart's 6.31% loss.
When it comes to portfolio positioning post-tariffs, many money managers say they now see better opportunities abroad, in places like Europe, where valuations are more attractive and currencies are gaining in value vs. the dollar.
"There's opportunities outside the U.S.," said Wolfe. "We love the U.S. and we're not saying abandon it. It's more that like most investors, we have been way overweight the U.S. for the last 15 years. A global reallocation will come as a result (of the tariffs and resulting upheaval in the global economic order)."
That shift appears already underway. In April, Latin America funds rallied 6.82% to extend their gains through the end of April to 20.15%. European region funds jumped 4.47% in the month and are up 14.84% in 2025. India region funds gained 4.13% in April to get back to break-even for the year. Japanese funds gained 3.63% in April to increase their year-to-date gain to 5.57%.
Taking Temperature Of China's Stock Market
The only laggard was China, which is in the crosshairs of the trade war with the U.S. and was hit with the largest tariffs from the Trump administration. China-region funds fell 4.28% in April, trimming their 2025 gain to 3.95%.
In another sign of foreign stock fund outperformance, the Vanguard Total International Stock ETF (VGTSX), which tracks stock markets all over the globe except for the U.S., gained 3.11% in April to extend its 2025 gain to 8.74%. In contrast, Vanguard Total Stock Market (VTSMX), which invests in all U.S. publicly traded stocks, fell 0.67% in April, leaving it down 5.49% so far this year.
The iShares Core MSCI EAFE fund, which tracks developed equity markets outside the U.S., rallied 4.22% in April and is up 12.09% on the year.
Fund investors with allocations to fixed income also benefited from diversifying their portfolios beyond U.S. stocks. The Bloomberg U.S. Aggregate Bond index, which tracks U.S. investment-grade bonds, inched up 0.39% in April and is up 3.19% on the year.
Bonds Hold Up Best
The strength of the U.S. bond market provided ballast for investors. Core bond funds rose 0.31% in April to extend their 2025 gain to 2.99%. Inflation-protected bond funds were up 0.13% to stretch their year-to-date gain to 3.91%. And while General U.S. Treasury funds fell 0.16% in April, they are up 3.29% so far this year.
Overseas fixed-income funds fared well, too. Global income funds rallied 1.61% last month and are up 3.91% in 2025. And international income funds jumped 2.5% in April and have posted a solid 4.33% gain on the year.
In the U.S. stock fund space, growth outpaced value. And large caps outperformed small caps.
Large-cap growth funds rebounded late in April to finish the month up 1.7%. But that gain wasn't enough to erase their 2025 losses, which stand at 7.72%. Large-cap value, which had been leading their large-cap brethren heading into April, tumbled 2.57% and are now down 1.62% for the year.
Small-cap growth funds fell 0.51% in April and are down 11.04 on the year. Small-cap value funds dipped 4.96% last month to extend their year-to-date loss to 12.1%.
On the sector front, science and technology funds fared best, rising 2.25% to trim their 2025 loss to 9.61%. Natural-resources funds were the worst-performing sector, falling 11.43% and putting them down for the year at a loss of 9.55%.
