"Follow the smart money" — this classic principle of technical analysis suggests it's safer to side with professionals rather than the crowd. However, in 2025, such an approach would have led to capital losses. Hedge funds, traditionally seen as smart money, have sold $1 trillion more in U.S. equities than they have purchased since the beginning of the year. Retail investors, by contrast, largely stuck to a "buy and hold" strategy — and as April draws to a close, it's clear this approach has paid off.

After Donald Trump's election victory, the S&P 500 posted the strongest post-election rally in history, driven by hopes that the 47th U.S. president would turbocharge an already booming economy. In reality, Trump's aggressive tariff policies have raised fears of an economic slowdown. Bloomberg now forecasts U.S. GDP growth to decelerate from 2% to 1.4% in 2025 and has raised the probability of a recession within the next 12 months from 30% to 45%.

S&P 500 P/E Ratio Dynamics

An economic slowdown would weigh heavily on corporate earnings, making investors increasingly cautious about investing in the S&P 500. American equities remain relatively expensive, and capital is steadily flowing out of the U.S. and into Europe. According to Allianz, the $28 trillion U.S. equity market is too large to be abandoned overnight. Nevertheless, even minor selling pressure could trigger significant market corrections — as seen after Independence Day earlier this year.

Despite Trump's hopes that the S&P 500 rally would continue after the election, the reality of his inauguration and policy actions made the first 100 days of his presidency one of the worst periods for the index on record. Only during the crises of 1937, 1941, and 1973–1974 were there more severe declines — and in those cases, the market remained under pressure until the year's end.

S&P 500 Performance After Inauguration

By late April, the "crowd" had seized the initiative. The S&P 500 rebounded, coming within 3% of the levels seen on America's Liberation Day. Horizon Investments notes that sustained momentum will depend on positive developments in U.S. trade negotiations with other countries.

Markets are now closely watching upcoming releases, particularly U.S. GDP data for the first quarter and April's employment report, to assess the extent of the economic slowdown.

Technical Outlook:

The S&P 500 continues to form a 1-2-3 reversal pattern on the daily chart, signaling a potential exhaustion of the corrective phase. Long positions initiated around the 5400 level should be maintained, with profit targets and potential reversals considered around 5625 and 5695. Failure of the bulls to hold above 5500 would signal underlying weakness and could trigger renewed selling pressure.