The month of April brought continued volatility, largely driven by headlines – so much so that the fundamental and technical views of the market didn’t provide much helpful guidance. And while there is a lot of debate as to how the current economic situation (mostly regarding tariffs and interest rates) will resolve, it is far too early to tell what will happen next.
Seasonality still suggests we could see some broad market strength over the next month or two, but as always, I’d like to see some technical factors support that move before becoming more aggressive in this environment.
The shift to the Value and Defensive sectors of the stock market remained relatively strong (in other words, those sectors didn’t get hit quite as much as others) during the recent volatility. In the few days following the initial news of tariffs, it seemed that everything was getting thrown out – even the asset classes that have seemed safer over the past few years didn’t entirely escape the market jitters. Many sectors are recovering now, but much of the Growth (and Technology) parts the market have been slower to improve.
Based on the 2-year Treasury yield, it would appear that the Federal Reserve is indeed late at cutting interest rates. Even so, as of today, there is less than a 5% chance that the Fed will cut rates at the next meeting in May. (Tom McClellan has done some great work on this if you want to check it out).
This month’s chart is another look at the “ducks” going around the pond – and this time we’re looking at the 11 sectors that make up the S&P 500 index relative to the T-bills ETF (BIL). Last week, most sectors were clustered in the Red (Lagging) box. And what comes next (eventually)? A push upward into the Blue (Improving) box. And when they all move there together, then the full S&P 500 index tends to follow that path. So for now, it looks like the index may have some more room to run, with all sectors joining in the fun.
Relative Rotation Graph (RRG) chart of the S&P 500 sector spyders (Source: Optuma)
Our Shadowridge Long-Term Trend indicator went negative on March 4th and has continued to be below that level for the entire month of April. Though there were a few attempts to go positive, each time, unexpected news events came in and knocked it back to negative.
Our Mid-Term Cycle indicator is back to positive as of April 24th but showed a shift in underlying strength as early as April 11th. Even with the evident shift in money flow that this cycle demonstrates, it was no match for unexpected news that pushed the market in random directions.
As of Wednesday night (April 23rd, 2025), our Shadowridge Dashboard showed Positive to Negative market sectors as 1 to 10 with Consumer Staples being the only positive sector. However, most other sectors are showing early signs of life (above 8-day EMA and positive MACD signals). So broad participation could be confirmed fairly soon.
Right now, there is only 1 RGB Bond Index trending positive, above its 50-day Moving Average. Just about every asset class took a hit post-tariff news, even some of these “safer” parts of the bond market. But even with the negative readings right now, many of these areas are recovering quickly and it won’t take much to see these back to green (positive) readings.
RGB Economic and Interest Rate Sensitive Bond sectors (Source: ShadowridgeData.com)
The Bond market still isn’t acting as the “safety” asset or “diversifier” you’d expect it to be in this volatile market. It does look like a set-up is there for a good run in a few of these bond sectors, if they can move enough to confirm a trend change. For now, we’re still holding shorter duration bonds both in US Government and Floating Rate. At some point, if broad interest rates fall, there could be an opportunity for longer-duration bond sectors. And that is something we’re watching closely now.
Bottom Line: Most stock market indexes bottomed around April 7th, but have remained volatile and moving in a somewhat violent “sideways” trend. There does seem a possibility the market could calm down for a bit in this 90-day tariff pause, so there could be a short-term trade in being invested for the next few weeks. Seasonality also suggests we should get some relief going into May. The old adage “sell in May” isn’t until the end of the month, but it will still be kept in mind.
Stay safe out there!
1 The Standard and Poor’s 500 is an unmanaged, capitalization-weighted benchmark that tracks broad-based changes in the U.S. stock market. This index of 500 common stocks is comprised of 400 industrial, 20 transportation, 40 utility, and 40 financial companies representing major U.S. industry sectors. The index is calculated on a total return basis with dividends reinvested and is not available for direct investment.
2 Charts are for informational purposes only and are not intended to be a projection or prediction of current or future performance of any specific product. All financial products have an element of risk and may experience loss. Past performance is not indicative of future results.