The stock market has been anything but quiet this year. Ripples first appeared when the emergence of China's DeepSeek started to raise questions on valuations of large artificial intelligence stocks. Then weaker economic data pointed to a slowing economy.
Following this, President Donald Trump imposed tariffs on imports to the United States, spooking investors. Then Trump announced even steeper tariffs on many countries, ratcheting up trade tensions, and all hell broke loose.
Even after the president announced a 90-day pause on the higher tariffs for most countries, the stock market has remained volatile, as investors continue to digest a lot of news with major ramifications. So after everything that's happened, should you buy the broader benchmark S&P 500 index (^GSPC +1.05%) while it trades below 5,670, the level it traded at before Trump launched steeper tariffs?
The worst-case scenario may be off the table, but risks remain
When Trump initially launched steeper tariff rates on a wide range of countries including China, Cambodia, Vietnam, and the European Union, many market strategists and economists sounded the alarm, saying the steep levies would stymie growth and quickly tip the U.S. economy into a recession, while challenging many companies as Trump attempted to reconfigure the global supply chain all at once.
The bond market also sounded the alarm, with the yield on the 10-year U.S. Treasury note initially tumbling but then surging in a bizarre move, considering so many expected economic growth to stall.
Following Trump's announcement on April 9 that he would pause most higher-tariff rates for 90 days, stocks ripped at a dizzying speed. The Dow Jones Industrial Average blasted close to 3,000 points higher, while the S&P 500 mooned over 9.5% in the third-best day of trading since World War II. Trump cited the fact that many countries had reached out to the White House to negotiate a trade agreement. While the president left high tariffs in place on China, and actually raised them to 145% (and now faces up to 245% tariffs per a White House fact sheet as of this writing), he also sounded optimistic that the two countries would work out some kind of trade agreement.
That still remains to be seen and the U.S. economy had already been showing signs of deterioration in recent months. U.S. consumer sentiment has plummeted and economists have revised U.S. gross domestic product lower, citing Trump's first batch of tariffs, which are very much in place. Twenty-five percent tariffs remain in place on steel, aluminum, and automobiles and there is still a base 10% tariff layer in place on imports from all countries during the 90-day pause.
It's also not like the S&P 500 is necessarily trading cheap, either. If you look at the Shiller CAPE ratio, which looks at the index's price over its 10-year average inflation-adjusted earnings, the S&P 500 trades more to the expensive end of where it has since the turn of the century. Part of this can be attributed to a problem the index had coming into this year, where a handful of high-flying artificial intelligence stocks in the index had risen to nosebleed valuations.
S&P 500 Shiller CAPE Ratio data by YCharts.
Should you buy the S&P 500 below 5,670?
Despite President Trump pressing the pause button on steeper tariffs for 90 days, I would expect the market to remain volatile, and it is by no means out of the woods yet. Furthermore, the economy and market had started to show some cracks in its armor prior to Trump announcing steeper tariffs and those issues haven't gone away, nor does the market look cheap historically.
Nevertheless, the hope is this administration can negotiate trade agreements with most countries, including China. History has shown that you can always buy the market if you have a long-term investing horizon. But this is not the time to be a hero.
Continuing to stay disciplined and dollar-cost averaging into the index, which involves investing a set amount of money over regular intervals, is important. This practice will smooth out your cost basis over time. The near term remains very uncertain and the market can certainly continue to go lower.
