Mid-April Market Recap: Markets in Motion, an Updated Outlook

Following a period of intense volatility and pressure, global markets find themselves at a delicate inflection point in the second half of April. A sharp rebound in equities, coupled with ongoing economic and geopolitical uncertainty, has created a complex environment characterized by both opportunities and risks. This article analyzes the key market dynamics, reviews the drivers behind the recent rally, and examines potential warning signs for the road ahead.

A Swift Rebound: Sharp Recovery from the Bottom

Since the low recorded on April 8, where the S&P 500 had declined approximately 19% from its February peak, the market has staged an impressive recovery, rising by about 14%. Within just 14 trading days, half of the previous losses were erased, signaling strong demand from investors eager to capitalize on the downturn. Extreme oversold technical conditions and historically negative sentiment provided fertile ground for the rebound.

Positive breadth indicators, including the rare occurrence of a “Zweig Breadth Thrust,” further accelerated the recovery. Historically, this phenomenon has occurred fewer than 20 times since the 1940s, and in every instance, the S&P 500 posted positive returns over the subsequent six to twelve months.

Macro Environment: Challenges Remain

Despite the sharp rally, underlying economic indicators and market structure suggest that risks have not been fully resolved. Momentum indicators remain relatively weak, with a limited number of stocks reaching new highs. Furthermore, the appearance of a “Death Cross” — where the 50-day moving average falls below the 200-day moving average — points to potential continued volatility and structural weakness.

From a macroeconomic perspective, the effects of restrictive trade policies are beginning to seep into growth forecasts. Declining sentiment among consumers and purchasing managers, coupled with rising recession risks, reflect a cautious economic backdrop. While markets are clinging to hopes for delayed tariff implementation or partial trade resolutions, the window for meaningful improvement may be narrowing.

Historical Context: Familiar Patterns

A historical review of market corrections shows that it typically takes about four months from peak to bottom for a sustainable recovery to develop. Rapid, steep declines — such as the current one — have often been followed by quicker recoveries. However, in many instances, including the 1987 crash, markets have “retested” previous lows before establishing a durable uptrend.

Given the current environment, several strategists argue that a retest of the April lows remains a distinct possibility, particularly if no tangible progress is made on trade issues.

Investor Sentiment: Tentative Improvement

Sentiment indicators have shown modest improvement: CNN’s Fear and Greed Index has rebounded slightly, and equity fund inflows suggest cautious optimism among retail investors. However, institutional investors largely maintain defensive positioning, and overall liquidity remains constrained.

It is worth noting that previous sharp rallies in retail investor favorites — such as Goldman Sachs’ Retail Favorites Basket — were often followed by near-term pullbacks, highlighting the need for continued vigilance even amidst strong rebounds.

Looking Ahead: What Will Determine the Next Move?

For the current rally to sustain, tangible improvements in the macroeconomic and political landscape will be necessary. Clearer signs of economic resilience, de-escalation of trade tensions, and stabilization in monetary policy are critical prerequisites for building a more solid foundation for further gains.

Meanwhile, the current earnings season for Q1 has produced mixed signals: while a high percentage of companies have exceeded expectations, management teams have generally refrained from offering optimistic full-year outlooks amid persistent uncertainty.

Ultimately, the trajectory of 12-month forward earnings estimates will be pivotal. If earnings projections stabilize or improve, the market may have room to extend gains. Conversely, continued deterioration in earnings forecasts would place the recovery at risk.

Conclusion

Mid-April 2025 has illustrated the strength of technical rebounds in environments of extreme fear, while simultaneously exposing the depth of challenges facing the global economy. The market has managed to erase half of the recent losses in a relatively short time, but the path forward appears more complex.

Investors are advised to maintain a balanced approach — avoiding excessive optimism while not succumbing to undue pessimism. Building a genuine base for further gains will require tangible improvements in macroeconomic conditions — a demanding but achievable goal.