While the S&P 500 index was almost unchanged in April, the dollar remained extremely weak, ending the month down over 4%. Since the beginning of February 2025, the S&P 500 index is down 6%, though this reflects a large bounce off the early-April lows. The dollar, on the other hand, is down 8% over this time frame, and the bounce off its late-April lows has been very tentative.
Digging a little deeper, the next table shows the returns experienced by major asset classes in April. The winners on the month were bitcoin, gold, and IGOV, an ETF which holds a global portfolio of developed market government bonds, and thus tends to do well--in dollar terms--when the dollar weakens. Other strong performers in April were all things international, including India, Europe, emerging markets, and virtually anything else not denominated in U.S. dollars. The month's losers were all things U.S.-related, especially the commodity complex and energy stocks.
Surprisingly, U.S. technology stocks eked out small gains in April, despite an onslaught of negative economic news. We think this is a good omen for what comes next. Our portfolios were slightly down in April, though they finished the month well off the lows established earlier in the month. You can see details about our performance here.
Tariffs, Tariffs, Tariffs
While the Trump administration's beef with many of our trading partners--and especially China--may well have some legitimate grounding, it is safe to say that the Liberation Day announcement of April 2nd was not handled very well. When near cataclysmic price action across stocks, Treasuries, and the dollar finally caused the Trump administration on April 9th to announce a 90-day hiatus on its tariffs plans, the market giddily rallied by 9.5%. And with a few twists and turns, the rally continues still.
What gives?
First, at the start of the month, very smart people were not sure which of two paths would be followed by the Trump administration. Path #1 was to negotiate with our trading partners, thus implicitly admitting that the Liberation Day tariff announcement were a negotiating tactic. Path #2 was that President Trump meant it when he said the tariffs were here to stay and everyone better get used to them. Obviously, the market took exception to the Path #2 trajectory, and fortunately the Trump administration seems to be backing away from that more absolutist stance. However, I must emphasize, that as of early April, it was far from obvious that this would happen. Path #2, with its very dire economic consequences, seemed to be a strong contender for policy supremacy.
Whether this was the plan all along, or whether market price action pushed the Trump administration towards Path #1 is largely irrelevant. Either the White House is truly a master negotiator, seeing many steps ahead of others in this geopolitical chess match, or the White House listens to markets, business leaders, politicians, and voters, and thus is willing to change its mind in response to new information. Either is a good sign.
Fast forward to now and the messaging coming out of the White House is radically different than in early April. Secretaries Bessent and Lutnick are openly discussing that we are now negotiating with our trading partners, especially it seems with Japan, South Korea, and India. President Trump is also on the record that we are negotiating with friend and rival alike, even with China, though China has not confirmed this to be true. Supporting the negotiations path are recent headlines of slowing growth in Japan and China, and reports of factories furloughing workers in China.
This isn't schadenfreude, but simply an acknowledgement that the U.S. is the major global importer and has a strong hand to play in trade negotiations, which are now underway. As I write this, the dollar is having its first strong day in weeks, up against a currency basket, and especially against the yen. Perhaps the recent media narrative of the end of dollar dominance is growing a bit long in the tooth, as narratives tend to do eventually. Despite our many self-apparent problems, the U.S. remains the global technology, innovation, and growth leader, and our system is stronger than any one person (witness the barrage of legal challenges to many of the Trump administration's policies).
As the New York Times wrote at the start of April, a trade simulation carried out by the Center for a New American Security showed that there is a way out of President Trump's trade war, and that path is through negotiations. It was not clear at the time that negotiation was the path of choice, but that seems to be more clear now. Couple this with the positive and intended consequence of many companies investing large sums of money in building high-tech manufacturing capacity in the U.S.--Nvidia, Apple, TSMC, among many others--and one may be forgiven for believing there is yet a path out of this mess that will make the U.S. and our trading partners better off. China remains the major wildcard but, even here, there are hints at a softening of stances and rhetoric.
Positioning for the Month Ahead
Where does that leave our portfolios? As I wrote to our model portfolio clients earlier today, our portfolio changes for May are minimal. The risk of reallocating portfolios in this market is that there is a single theme, that everything moves largely in sync in relation to that theme, and every smart person in the investing universe is poring over every conceivable trade which can benefit from what's been going on. What is QuantStreet's edge in playing this game? I don't think we have any.
In this case, it seems like the best bet is to stay invested at the risk and liquidity levels that are appropriate for each client, to not engage in unnecessary and unhelpful portfolio churn, and to wait for the day of decoupling of asset classes, at which point our asset allocation process can again add value. As my many years of proprietary trading have taught me, sometimes the best trade is to just do nothing.
Working with QuantStreet
Harry Mamaysky is a professor at Columbia Business School and a partner at QuantStreet Capital.
QuantStreet is a registered investment advisor. It offers wealth planning, separately managed accounts, model portfolios and portfolio analytics, as well as financial consulting services. The firm’s approach is systematic, data-driven, and shaped by years of investing experience. To work with or learn more about QuantStreet, join our mailing list or contact us at [email protected].
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