April Market Commentary | Rebound or Reset?

This is an edited summary of Rob Edel’s Market Commentary. To read the full version, click here.

Thoughts from the Desk of the CIO

We’ve been here before. The headlines shift, markets rally on hope, and the narrative starts to feel like things are turning. But as stewards of multi-generational wealth, we don’t invest based on headlines—we invest based on fundamentals. And today, those fundamentals still warrant caution.

As of May, the S&P 500 has bounced back into positive territory for the year, which naturally invites optimism. But this rebound has come at a cost. The market is now trading at nearly 28 times earnings, far above its long-term median of 17 to 18. The Shiller PE ratio has also climbed back to 36, a level that historically signals lower long-term returns. For investors focused on preserving and steadily growing capital, these valuations should be a signal to pause and assess.

Chasing overpriced markets often leads to disappointment rather than outperformance. The bond market reflects this caution. Ten-year Treasury yields are back near 4.5%, reflecting renewed pressure on inflation expectations, fiscal policy, and geopolitical risk. These are not just short-term fluctuations; they are indicators that the cost of capital is increasing and uncertainty remains high.

While recent trade headlines suggest progress, tariffs remain materially elevated, raising costs and clouding earnings visibility. Similarly, reshoring efforts are more about automation than jobs, limiting their near-term economic upside. The economic drag from these policies isn’t behind us—it’s just beginning to be felt. While the economic lift from reshoring will be slow and structurally limited.

What hasn’t changed, and what continues to concern us, is the U.S. fiscal position. The government remains on a path of unsustainable debt accumulation, with little political will to reverse course. Interest costs are rising, and deficit discipline is nowhere in sight. This is not a backdrop for taking undue risk.

At Nicola Wealth, we believe this remains a risk-off environment. Against this backdrop, we’re not retreating, we’re reinforcing. We remain laser-focused on building portfolios that thrive not just in calm, but in chaos. That doesn’t mean running for cover—it means being deliberate. It means emphasizing consistency over speculation and focusing on what truly drives long-term results: dependable cash flow, quality assets, and disciplined diversification. Across our public markets exposure, we lean into dividend-paying equities with strong fundamentals. In private capital, we own businesses that generate reliable income with potential upside from operational efficiencies. And in real estate, we target high-quality assets with consistent monthly cash flows from rent and the potential for appreciation of income and price over time.

This approach isn’t about trying to time the next market move. It’s about building resilient portfolios designed to support through cycles, not just in spite of volatility, but because they’re built for it. We’re not betting on headlines because we cannot predict them. We’re building for durability. That means prioritizing income-generating assets, maintaining discipline amid volatility, and leaning into our strengths as a diversified, active manager.

In this environment, resilience is earned, not assumed. And that’s exactly what we’re working to deliver.

—John Nicola 
Chairman, CEO, and Chief Investment Officer 

Key Insights

• Market volatility rises amid tariff uncertainty
• U.S stocks face a reality check
• Global markets reassess the American advantage
• Recession outlook and diverging economic signals
• Global economic rebalancing: U.S.-China relations

Tariff shock and market snapback

For the first half of April, markets were down. By the end of the month, however, traders were all smiles again. Last month, we warned investors to brace for a rollercoaster ride, and the markets delivered just that. The S&P 500 fell sharply following President Trump’s April 2 “Liberation Day” tariff announcement. By April 8, large-cap U.S. stocks had dropped nearly 11% from the start of the month and almost 19% from their February 19 high, coming dangerously close to marking the start of a bear market. However, by May 2, the S&P 500 had rebounded by over 14%, erasing all of the losses from the tariff-driven sell-off. Bond yields mirrored this volatility, with 10-year yields reversing the downward trend seen earlier in the year, rising sharply in early April.

U.S stocks face a reality check

U.S. stocks are off to their worst start in more than 30 years relative to global peers. While both U.S. and non-U.S. stocks have rebounded since Trump’s April 2 tariff announcement, non-U.S. stocks have bounced back more quickly. In April, the S&P 500 was down nearly 5% year-to-date, while the MSCI All-Country ex-U.S. index gained just over 9%. While historically supported by higher profitability and investment intensity, recent earnings revisions suggest cracks are emerging. According to Apollo, more S&P 500 firms are lowering earnings guidance than at any point since 2020. Wall Street sentiment has turned cautious, with sell-side analysts trimming year-end targets and institutional managers showing their most bearish outlook in nearly 30 years. 

Global markets reassess the American advantage

The relative weakness in U.S. stocks in 2025 may signal that investors are re-evaluating the concept of U.S. exceptionalism. There are both advantages and disadvantages to consider. From a GDP perspective, U.S. stocks significantly outperform their global counterparts, and represent 63% of the global stock benchmark MSCI All Country World Index, far exceeding America’s 27% share of global GDP. U.S. stocks are also notably profitable. Profit margins for U.S. companies have consistently outpaced those of European companies since 2009. While the S&P 500’s outsized exposure to the technology sector accounts for much of this difference, U.S. exceptionalism extends beyond just tech and Silicon Valley. 

Recession outlook and diverging economic signals

With such high stakes, economists are reluctant to make a definitive call, with the chances of a recession now seen as nearly a coin toss. According to a recent Bloomberg survey of economists, the median respondent estimates a 45% chance of a downturn in the next year, up from 30% in March. In their defence, economic data has been far from conclusive. Soft data (based on surveys and sentiment) has turned sharply negative, while hard data (actual economic figures) has remained resilient. For example, the Conference Board reported last month that consumer confidence dropped to five-year lows, while consumer expectations fell to their lowest level in 14 years. According to the Bureau of Labor Statistics, however, the job market remains in decent shape. Hiring has slowed, but layoffs have remained stable. Consumer confidence and employment are key indicators for the future direction of the economy, and they are not telling the same story. 

Global economic rebalancing: U.S.-China relations

We do not claim to understand President Trump’s tariff strategy, and we’re not sure Treasury Secretary Bessent fully does either. However, we agree that the global economic order needs rebalancing, particularly between the world’s two largest economies, the U.S. and China. Recent commentary from U.S. leadership has called into question the long-term sustainability of the current trade and debt dynamics, highlighting concerns about reliance on foreign manufacturing and financing. These remarks have drawn attention to the underlying tensions in the U.S.–China relationship, even as official responses from Beijing remain muted. 

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April Market Commentary | Rebound or Reset?