The U.S. stock market has staged a remarkable comeback just one month after President Trump’s April 2 tariff shocksent Wall Street into a nosedive.
Back then, the S&P 500 (^GSPC) plunged over 10% in just three days, following Trump’s surprise announcement of sweeping “Liberation Day” reciprocal tariffs — a jarring policy pivot that rattled investors and triggered one of the steepest short-term declines since World War II.
At its worst, the S&P had fallen more than 19% from its February record highs. But as of Friday’s close, the index is now up 0.3% from its April 2 level, fully erasing the losses and tipping into positive territory.
What Sparked the Reversal?
Two key catalysts have driven this market turnaround:
- A 90-day tariff pause announced by the White House just one week after the initial tariff blitz. The market responded with a 9.5% gain in a single day — its best session since the 2008 financial crisis.
- Strong Big Tech earnings, particularly from Microsoft, Meta, and Nvidia, which helped restore confidence amid policy chaos.
These events are visualized in Yahoo Finance’s “Chart of the Week”, illustrating how quickly sentiment has shifted.
A New Tariff Normal?
Despite the bounce-back, analysts warn the market may not be out of the woods. Piper Sandler strategist Michael Kantrowitz cautions that volatility could persist, as investors wait for clarity on the long-term economic effects of what are still the highest tariffs in decades.
“I still very much believe that the primary driver of equities right now is going to be all these headlines coming out of Washington,” said Kantrowitz.
Friday’s strong jobs report and GDP data suggest the economy remains resilient for now. But the true cost of tariffs — in the form of inflationary pressures and weakened earnings — may take months to emerge.
“The data really hasn’t shown up yet,” Kantrowitz noted. “We’ve just begun to see this reflected in the economy.”
Three Potential Scenarios From Here
Analysts are watching three possible trajectories for markets:
- Breakout Rally – If trade talks cool tensions further and earnings continue to impress, the S&P 500 could break into new highs.
- Sideways Chop – Uncertainty and data lags could trap markets in a range-bound limbo, punctuated by tariff and Fed headlines.
- Second Shockwave – If recession risks grow or Trump reactivates paused tariffs, a renewed downturn is possible.
For now, the market has managed to claw back what it lost — and then some. Whether it can build on these gains depends on policy decisions still unfolding in Washington.
