Meanwhile, equities from across the world outperformed U.S. stocks. Germany led the way with gains of almost 30%. Brazil has also seen strong returns of 22% so far this year. French and Chinese equities both hovered around 18% through Friday. 

Much of the year’s declines stemmed from a steep drop in equity prices that came on the heels of President Donald Trump’s tariff policy announced on April 2. Markets immediately reacted violently when Trump announced the news. The policy induced a widespread sell-off that hit every corner of U.S. markets and signaled a brief but unprecedented lack of faith in the American economy. Equity prices tanked, bond yields soared, and the dollar dropped compared to other currencies. 

Now, U.S. stocks find themselves having to make up the ground they lost during the downturn. 

“It feels like one of the more unnecessary bear markets we’ve ever gone through,” said Ben Carlson, director of institutional asset management at Ritholtz Wealth Management. 

Carlson pointed to the fact that U.S. stocks soared after Trump’s election in November 2024. The markets, he argued, seemed primed for growth on the expectation that a second Trump administration would lower taxes and cut regulations. However, once tariffs became top priority for Trump’s policy agenda, that dissipated.

“If he would have not really committed so hard to the trade war, I think it’s possible stocks are probably much higher than they are today,” Carlson said. 

Somewhat unexpectedly, investors who had pulled their money from U.S. stocks sought refuge in other markets, rather than in U.S. Treasury bonds. For the past several years, the U.S. had outperformed the rest of the world, but based on the S&P 500’s current trajectory, that trend seems set to end. 

U.S. equities have since rebounded from their 2025 lows. 

“I think if you would ask anyone a month ago, are we going to go on a round trip completely? No one would have said, Yes,” Carlson said. “Things looked pretty bleak.”

Markets reacted extremely well to news that the U.S.was pausing its tariff policy on other countries. But the U.S. notably singled out China, placing 145% levies on its imports, which seemed to set up a trade war between the world’s two largest economies, further strengthening the case for investing in foreign markets insulated from the potential financial carnage. That said, delegations from Washington D.C. and Beijing met in Switzerland last week and announced they would both lower their respective tariffs. 

Now, markets are eyeing a series of trade agreements with other countries that might restore some stability to the U.S. So far, the White House announced a deal with the UK and has said more than a dozen others are in the works. On Friday Trump said Friday it would be impossible to negotiate deals with every single country, and said “very fair” tariffs will be coming in a matter of weeks. 

During Trump’s current state visit to several Gulf countries, he also announced several major investments from the likes of Saudi Arabia, Qatar, and the United Arab Emirates. The Gulf countries pledged to purchase hundreds of billions in AI infrastructure from U.S. companies. 

“I still think that despite all the excitement over these Oprah Winfrey-like giveaways being announced in the Middle East that we won’t avoid a recession albeit maybe it’s a brief, shallow one,” said Paul Meeks, a longtime tech investor and a professor at the Baker School of Business at The Citadel. 

Investors still see the U.S. economy teetering between a possible recession and a return to normalcy. The steady lowering of tariffs could mean they will continue to come down. Even if they stay at their current levels, it will at least offer businesses some clarity about the shape of U.S. trade policy. On the other hand, more pessimistic investors would argue the presence of 10% tariffs on other countries and 30% tariffs on China still represent substantial cost increases that would hurt growth and possibly further hamper the stock market. 

But bad stock market performance could help avoid the worst outcomes, according to Carlson. “It was the stock market that forced his hand, and because it went down so far so fast, that caused him to back off, which ironically, caused the stock market to rebound,” he said.