The stock market’s performance is a function of two variables: earnings and valuations. A company generates profits, and investors assign a multiple to those profits, such as 15x or 20x earnings, to determine the company’s valuation. This year, earnings have been in the spotlight as policy uncertainty around tariffs and global trade clouds the outlook. With Q2 earnings season starting in mid-July, it is a good time to see how companies performed in Q1.

This week, stocks rose, with the S&P 500 approaching its all-time high from February 19th. The Russell 2000 increased by 2%, and high-beta stocks surged nearly 3% due to semiconductor strength. Energy was the best-performing sector, boosted by a 7% rise in oil, while technology, consumer discretionary, and health care also excelled. In the credit market, long-duration Treasury and corporate bonds gained as yields fell following favorable inflation news. Volatility decreased in both markets, and the US dollar hit a three-year low, with gold seeing a modest increase.

Markets have weathered two months of policy-driven volatility, only to return roughly to where they started. After a nearly 20% decline from late February to early April, the S&P 500 has rebounded and is within 4% of its all-time high. What remains is weakened business and consumer confidence, rising inflation expectations, and a Federal Reserve that has paused interest rate cuts. The threat of a full-scale trade war and global supply chain disruption has diminished, but the full impact of recent events may take months to become known.

Stocks edged lower this week, with the S&P 500 declining less than -1%. Smaller companies underperformed, while the Nasdaq Index remained a relative outperformer. The bond market saw the most notable development, as the US debt downgrade and deficit-funded tax cut bill pushed Treasury yields higher. Volatility picked up modestly, with both equity (VIX) and bond (MOVE) gauges rising after recent declines. Meanwhile, the U.S. dollar weakened amid growing fiscal concerns

Our US Risk Demand Indicator turned positive this week after turning negative and signaling risk off in March. The official reading is +0.01, slightly positive but enough to signal risk-on. As discussed below, the market has rebounded sharply off the April 8th lows as tensions eased. Given the fluid backdrop, the market could fluctuate between risk-on and risk-off in the coming months

As trade policy changes, soft and hard economic data are back in the news. Soft data, such as surveys, measures sentiment, expectations, intentions, and how respondents feel about the economy. In contrast, hard data measures actual results and activity, such as production, spending, and job growth. While they typically move together, there are periods of heightened uncertainty where they can diverge, such as today. This month’s chart focuses on the difference between soft and hard economic data and discusses how to interpret their recent divergence.

This week, stocks sold off early in the week but rebounded to finish higher after the administration announced a UK trade deal. The Russell 2000 led the gains and outperformed the S&P 500, with outperformance from the Equal Weight, Value, and High Beta factors as well. Volatility eased across markets, with both the VIX and MOVE indices falling as tensions continue to de-escalate. Meanwhile, the US dollar strengthened, and oil prices rose despite OPEC signaling plans to increase output.

Markets were turbulent in April as new White House tariffs initially triggered a sharp stock sell-off, with the S&P 500 dropping over 10% before rebounding to end the month down less than 1%. Interest rates and bond markets remained flat despite volatility. Gold hit a record high, while the U.S. dollar weakened amid policy uncertainty. Overall, US policymaking has played a significant role in driving global market movements this year.

This week, stocks ended the week higher after an early-week selloff. The S&P 500 gained +3.9% as it climbed back toward “Liberation Day” levels. The tone was broadly risk-on: the Russell 2000 outperformed the S&P 500 with a +4.2% gain, High Beta outperformed Low Volatility, and cyclical sectors led defensives. In the fixed-income market, bonds were flat as Treasury yields stabilized. Notably, corporate high-yield outperformed as credit spreads re-tightened, another sign of improving risk sentiment.

This week, the S&P 500 ended flat after giving back most of its early-week gains tied to the administration's exempting tech products from China tariffs. The Nasdaq returned -0.5%, with the Magnificent 7 and Technology leading to the downside after last week’s relief rally. High beta and growth factors underperformed, while low volatility, value, and equal weight factors outperformed. International posted another strong week, and USD weakened, suggesting investors continue to rotate out of US assets.

Markets remain volatile, with the CBOE VIX and MOVE Index still elevated. The S&P 500 fell -2.4 %, but the decline masked sharp swings, with intraday moves of over 7% on three of four trading days. Despite the loss, the tone was broadly risk-on after President Trump announced a 90-day pause on reciprocal tariffs. Markets have experienced several significant multi-standard deviation events in recent weeks. Until more clarity, we expect volatility to remain elevated and asset gains to be limited.

Last week, President Trump announced new tariff measures, including reciprocal tariffs on about 60 countries with significant trade imbalances or barriers, and a 10% baseline tariff on all imports and higher These changes mark a sharp shift from decades of declining tariff rates, with the average U.S. tariff projected to rise from under 3% to over 20%, the highest in nearly a century.