Staying Resilient in Uncertain Markets

Markets Mixed in April Amid Volatility

Although US markets struggled in the first half of April on the back of tariff-related worries, the second half of the month was characterized by rallies amid policy reversal and easing of geopolitical tensions. However, both the S&P 500 and Dow Jones Industrial Average indices still fell in April (-0.7% and -3.1%, respectively), marking the third consecutive losing month for both indices. International developed equities and US growth posted gains (+4.0% and +2.0%, respectively), while US small-caps and US value declined (-4.1% and -3.6%, respectively). Bonds were also mixed, as the 7-10 year US Treasuries and the US Aggregate Bond Index were up (+1.1% and +0.4%, respectively) while municipal bonds and investment grade corporate bonds fell (-0.4% and -0.2%, respectively). Aside from gold (+5.4%), commodities produced negative returns as crude oil was down 17.8%, broad-based commodities fell 5.2%, and silver decreased 4.5%.

Powell Signals Patience Amid Policy Uncertainty

In his most recent remarks, Federal Reserve Chairman Jerome Powell struck a cautious and patient tone as policy uncertainty, particularly around trade, clouds the economic outlook. He stated, “Inflation has come down a great deal but is running a bit above our 2 percent objective,” as March annualized Core PCE (Personal Consumption Expenditure Index) showed a 2.6% rise. Moreover, Powell indicated that tariffs are “highly likely” to create at least a temporary increase in inflation. He also pointed to a sharp decline in sentiment across households and businesses, attributing the shift in part to the new Administration’s significant policy changes. Market participants currently expect the Fed to hold interest rates steady at 4.25–4.50% at the upcoming May FOMC meeting.

Tariff-Induced Stagflation, or Recession

Amid rising tariffs, markets are increasingly pricing in a stagflationary environment, characterized by higher yields/inflation alongside weaker growth and equity performance. However, if the economic fallout from tariffs proves too severe, the U.S. could enter a recession, leading to declines across yields, growth, and equities.

CEO Sentiment on Profitability and CapEx Declines

Since January, CEO sentiment has meaningfully deteriorated as an increasing number of executives anticipate no change or a decrease in both profitability and capital expenditures twelve months out. As of April, the share of executives expecting a decrease surpasses those forecasting an increase across both categories.

Time to Take Profits, or Will the Rally Continue?

Since the April 8th lows, which consists of only 17 trading sessions, the S&P 500 has rallied over 12.5%. Since 1988, there were 13 other instances resulting in a gain of 12.5% or more over the same number of sessions, and stocks rallied onward thereafter in most of these cases. Given looming policy uncertainty, is it time to take profits, or will stocks rally on?

Staying Resilient in Uncertain Markets

It’s tempting to get caught up in the latest headlines, but news changes on a dime, and that’s why we believe in sticking to a long-term investment plan. We're not leaning bullish, but we’re also not embracing a fully bearish stance either; we’re positioned with caution. While what has worked over the last few years likely won’t be what leads in the next, we feel it’s crucial to focus on diversification and liquidity. A well-balanced portfolio inclusive of international equities and alternative assets can also help navigate this new cycle. If a recession is indeed unfolding, bond prices are likely to rise as yields fall, offering a potential buffer.

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Warranties & Disclaimers

As of the time of this publication, Astoria Portfolio Advisors held positions in SPYG, SPY, SPYV, SPDW, SPMD, SPSM, SPEM, SPBO, SPAB, MUB, IEF, SPIP, GLD, SLV, USO, and BCI on behalf of its clients. There are no warranties implied. Past performance is not indicative of future results. Information presented herein is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. The returns in this report are based on data from frequently used indices and ETFs. This information contained herein has been prepared by Astoria Portfolio Advisors LLC on the basis of publicly available information, internally developed data, and other third-party sources believed to be reliable. Astoria Portfolio Advisors LLC has not sought to independently verify information obtained from public and third-party sources and makes no representations or warranties as to the accuracy, completeness, or reliability of such information. Astoria Portfolio Advisors LLC is a registered investment adviser located in New York. Astoria Portfolio Advisors LLC may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements.