The S&P 500’s (^GSPC) macro moment may be over.
As tariff news whipsawed markets to start the second quarter, stocks moved roughly in unison. In April, the one-month correlation of stock movements within the benchmark index soared to nearly 0.7, a level only seen in the past five years when the Federal Reserve began hiking interest rates in 2022 and during the onset of the pandemic.
But as President Trump has dialed back the height of his tariffs on other nations, the correlation between stocks in the S&P 500 has tumbled to about 0.16. Piper Sandler chief investment strategist Michael Kantrowitz wrote in a note to clients that this is a sign that the market is shifting from a macro-driven market, where headlines on US trade policy have produced massive swings, to a market driven by company-specific fundamentals.
“After two months of macro-dominated markets, we’re likely to continue seeing markets, economic outlooks and sentiment stabilize,” Kantrowitz wrote on Wednesday. “We are transitioning to a backdrop with mixed data and mixed views. This should keep market correlations low, as stocks should trade more with micro fundamentals and note entirely on macro headlines like we saw earlier this year.”
He added that “many of the macro fears that remain are more likely to be issues that differentiate stocks rather than dominate all of them.”
