Market Review
In like a lion, out like a lamb: redux
If an investor were to look at the opening and closing market index levels for the month of April, it would appear to have been a relatively quiet month for most asset class returns; while in reality, it was anything but. Intra-month, multi-asset class volatility was among the most extreme levels on record (Figure 1). The April 2 U.S. tariff announcement ignited volatile market reactions in stocks, bonds and currencies, while the April 9 tariff pause catalyzed reversals of the violent moves that continued to play out for the rest of the month. In short, April was a month in which markets moved on fiscal and monetary policy-related headlines, but also was one of underlying resilience, in our view.
Figure 1. One-day Change in the CBOE Volatility Index® (VIX)
Following the pause on most reciprocal tariffs, the VIX had its largest single-day decrease in history
As of 4/11/2025. Source: Bloomberg L.P.
View accessible version of this chart.
The S&P 500® entered April in correction territory and narrowly avoided a bear market; at one point, the index was down nearly 19% from its February high, prior to rebounding during the second week of the month. Ultimately, the index posted its third consecutive negative monthly return, down approximately 1%. International equities experienced another month of relative outperformance, aided by the falling U.S. dollar.
The bond market also experienced significant volatility as the 10-year U.S. Treasury yield had its widest monthly fluctuation since the regional banking crisis in 2023. New issuance in the investment grade credit market began to stall, and below-investment grade credit spreads widened by more than 100 basis points in the four days leading up to the market reversal. However, by month end, interest rates made a dramatic turn lower, credit spreads compressed and the Bloomberg U.S. Aggregate Index eked out a positive return, acting as ballast for a volatile equity market for a second consecutive month.
Theme of the Month
Sell in May and go away: myth-busters edition
Given the level of volatility that characterized markets in April, and the still-elevated economic uncertainty, the adage “sell in May and go away,” which references the practice of selling stocks in May and not looking at portfolios until the end of October, may entice more investors this year.
Typical explanations behind the theory include:
- there is often lower trading activity and less attention paid to economic data in the summer months due to holiday vacations; and
- historically, September has been the worst month for equity market returns.
That said, we caution against following this line of thinking as evidence supports staying invested and diversified, rather than trying to time the market. Historically, it has paid off to remain fully invested, rather than trading in and out of the stock market attempting to time specific events or capitalize on seasonality trends. Over the past 20 years, investors have been penalized for missing the best market return days (Figure 2). In this case, “best” is defined as the highest one-day returns in the S&P 500 and illustrates that missing even the best 10 days can still meaningfully impact total returns.
Figure 2. 20-year Daily Returns
Timing the market is not only difficult, trying to do so can be costly to investors
Period of Investment |
Average Annual Return |
Value of Initial Investment of $10,000 |
Fully Invested |
8.9% |
$54,575 |
Miss the 10 Best Days |
4.7% |
$25,029 |
Miss the 20 Best Days |
2.1% |
$15,025 |
Miss the 30 Best Days |
-0.1% |
$9,873 |
Miss the 40 Best Days |
-1.9% |
$6,795 |
Fully Invested |
8.9% |
$54,575 |
Miss the 10 Best Days |
4.7% |
$25,029 |
As of 3/31/2025. Source: Bloomberg L.P.
Additionally, it is worth noting that historically many of the market’s best days have occurred near the worst days. We witnessed a prime example of this phenomenon in April; the S&P 500 ended the first week of the month with two consecutive days of negative returns, on par with drawdowns not seen since 2020 — only to be followed with a significant, 9.52% return on April 9. If an investor had sold equities amid the fear and uncertainty during the first week of April, they would have missed out on one of the largest one-day gains in post-World War II market history.
Over the last 20 years, investing in the S&P 500 from the beginning of May through the end of October resulted in an average return of 3.96%, versus an average cash return of 0.83% (Figure 3). The difference is even more pronounced in the five- and 10-year timeframes, since the severe 2008 drawdown is included in the 20-year figures. In 16 of the last 20 years, the S&P 500 outperformed cash, and in 17 of the last 20 years, S&P 500 returns were positive — both of which support the idea that it has been largely beneficial to stay invested. Additionally, we believe seasonal investment strategies ignore the unique circumstances of each year and shift the focus away from our investment process that analyzes the business cycle, valuations and technicals.
Figure 3. May - October Returns
Sell in May and go away adage is not living up to its hype
As of 4/30/2025. Source: : Bloomberg L.P.
View accessible version of this chart.
We strongly believe that staying invested is the key to building long-term wealth. Furthermore, maintaining a diversified asset allocation is the key to consistent, risk-adjusted returns — especially during periods of significant volatility, like occurred during the month of April. From a style perspective, although April ended with growth outperforming value due to a strong mega-capitalization technology stock rebound, value still outperformed growth during the larger drawdowns. International equities continued their positive trend for the year, and despite a rocky start, core fixed income returned to play a ballast role over the course of the month, ending with a positive return compared to U.S. equities. Additionally, having an allocation to alternative investments, with lower correlations to public investments, was also beneficial during the volatility.
In summary, April provided investors with an opportunity to recognize the value of multi-asset diversification during times of market stress. While it is not easy to predict which asset class will perform best over short-term periods, staying diversified has historically led to a smoother ride over time.
For more information, please contact your PNC advisor.
Figure 1: One-day Change in the CBOE Volatility Index® (VIX) (view image)
Following the pause on most reciprocal tariffs, the VIX had its largest single-day decrease in history
Cboe Volatility Index |
|
2001 |
-0.98 |
2005 |
-0.64 |
2009 |
1.28 |
2013 |
-0.12 |
2017 |
1.02 |
2021 |
-0.26 |
2025 |
-1.05 |
As of 4/11/2025. Source: Bloomberg L.P.
Figure 2: 20-year Daily Returns
Timing the market is not only difficult, trying to do so can be costly to investors
Period of Investment |
Average Annual Return |
Value of Initial Investment of $10,000 |
Fully Invested |
8.9% |
$54,575 |
Miss the 10 Best Days |
4.7% |
$25,029 |
Miss the 20 Best Days |
2.1% |
$15,025 |
Miss the 30 Best Days |
-0.1% |
$9,873 |
Miss the 40 Best Days |
-1.9% |
$6,795 |
Fully Invested |
8.9% |
$54,575 |
Miss the 10 Best Days |
4.7% |
$25,029 |
As of 3/31/2025. Source: Source: Bloomberg L.P.
Figure 3: May - October Returns (view image)
Sell in May and go away adage is not living up to its hype
S&P 500® |
3 Month T-Bill |
|
5-year Average Return |
7.57% |
1.21% |
10-year Average Return |
5.86% |
0.89% |
20-year Average Return |
3.96% |
0.83% |
As of 4/30/2025. Source: Bloomberg L.P.
