The end of April and the first few weeks of May have brought a much-needed reprieve to the persistent chaos and uncertainty that were present in the first few months of 2025.
The VIX, which had spiked to levels unseen since the Covid era has mercifully fallen back below 20.
The Nasdaq (which had briefly entered bear market territory) and the S&P 500 (which came close) are now positive on the year.
And we’re no longer seeing the same kinds of wild intraday swings that were making investors’ heads spin in the week-plus that followed the April 2 “Liberation Day” tariff announcements.
The market owes this improvement, of course, to the ongoing trade negotiations between the U.S. and China, the early days of which have seen tariffs slashed by 115% and a number of restrictions and export/import controls lifted.
Does it mean the worst of the early-2025 selling is behind us, and that a bear market (at least in the S&P) has been avoided?
It’s too early to tell. Widespread global tariffs are merely on a 90-day pause and loom as a massive dark cloud that could come back into play; and one tweet or comment from the president could cause panic all over again. But, it’s progress at a time when investors desperately needed it.
The prognosis is as good, arguably, as it’s been at any point since tariffs were first announced. And it’s prompted a quick snap-back rally in some of the hardest hit stocks, as “risk-on” growth stocks quickly came back into favor.
But despite that rally, value stocks continue to outperform. The Vanguard Value Index Fund ETF (VTV), is higher by 1% year to date and never approached bear territory the way the major indexes did (the VTV was down “only” 14.5% at its trough).
Growth, on the other hand, as measured by the Vanguard Growth Index Fund (VUG), has risen only 0.2% so far in 2025 and fell as much as 23% from its February 19 high to its April 8 low.
Plus, value stocks continue to trade at a discount, with a forward P/E of 17.1 for large-cap value vs. a forward P/E of 20.4 for the S&P 500 as a whole (and 24.3 for S&P 500 growth stocks).
In other words, the snap-back rally of the last few weeks has once again pushed the valuations of growth stocks to levels that may quickly wilt in the face of renewed tariffs or abandoned negotiations.
Given the news-driven nature of the market these days, and the unique susceptibility of growth stocks to negative headlines, investors would do well to consider adding stable value-focused investments to their portfolios. Not only are they outperforming growth names this year, but they’re likely to remain resilient should trade talks break down.
That’s why I currently have nine Buy-rated stocks in my Cabot Value Investor advisory portfolio. To learn their names, simply click on the link above.
