3 Reasons Why the Market Could Blossom in May

Historically, April is the second-strongest month of the year, with the S&P 500 gaining 1.7% on average in post-election years since 1950.

Unfortunately, the proverbial “April showers” drenched Wall Street and dampened investors’ moods, so April 2025 did not live up to this historical precedent.

I think it’s safe to say we all know why: Tariffs.

Now, I understand the uncertainty that many investors have felt about the tariffs. But I have been on record saying that the market’s response has been a gross overreaction.

Of course, President Trump is going to do what he does. But I have also said that if you are looking for reassurance, the person to watch during all of this is Treasury Secretary Scott Bessent.

Still, I think the negativity the financial media has flooded the airwaves with lately is responsible for much of the uncertainty. The foreign media has been particularly negative, as it is eager to blame the Trump administration for all of the problems in their respective economies which were already struggling.

So, when American investors wake up in the morning and see all of these negative headlines, it’s natural that they would feel gloomy.

However, as the old saying goes, with April showers come May flowers. And I think there will be some very beautiful flowers in the market in May, especially from my Growth Investor stocks. So, in today’s Market 360, I want to talk about a few green shoots that are already emerging in the market.

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Green Shoot #1: Thawing Tariff Tensions

As you know, the trade war between China and the U.S. escalated in early April.

China turned up the pressure by banning all rare earth exports to the U.S., which included rare earth magnets. This ban will hinder the electric vehicle (EV), technology, aerospace and defense industries. China also halted deliveries of Boeing Co. (BA) jets, with 10 new 737 Max jets grounded before they could be shipped to three Chinese airlines.

The Trump administration responded in kind, banning NVIDIA Corporation (NVDA) from delivering its H20 GPUs to China. The H20 chip was specifically developed for China after the Biden administration placed restrictions on AI chip shipments.

However, this week, Treasury Secretary Scott Bessent told attendees at a closed-door investor summit that the tariff standoff with China cannot be sustained by both sides. He noted that the world’s two largest economies will have to find ways to de-escalate tensions – and this de-escalation will come soon.

Well, during a press conference on Tuesday, President Trump noted that the final tariffs on China will be a lot lower than current levels. He even added that if China and the U.S. cannot come to an agreement on tariffs, he may still lower key tariffs. Trump predicted that the final tariff on China would not be “anywhere near” the 145% level, and he added that “we’re going to be very nice” in negotiations.

I should also add that the U.K., the European Union (EU) and about 130 countries are all negotiating new trade agreements with the U.S. – and that should remove most trade barriers.

So, freer trade should be the end result.

Green Shoot #2: Powell’s Job Is Secure… for now

Given that the Federal Reserve has sat on its hands this year, President Trump’s frustration was on display this week – and that ignited fears that Fed Chair Jerome Powell’s job was in jeopardy.

Last week, Powell appeared before the Economic Club of Chicago, where he said that there is a “strong likelihood” that Americans will face higher prices, and the U.S. economy will see higher unemployment due to tariffs. He continued saying that this environment would create a “challenging scenario” for the Fed because any adjustments to interest rates to address inflationary pressures could worsen unemployment and vice versa.

Powell concluded, “It’s a difficult place for a central bank to be, in terms of what to do.”

Clearly, the Fed and Powell remain concerned about inflation. But the reality is consumer and wholesale inflation both declined in March. Also, deflation has actually arrived in the wake of the lowest crude oil prices in four years.

So, the Fed, Powell and even our allies are needlessly worried about inflation.

It’s clear that Powell is not an economist, and that’s why President Trump responded on Truth Social, stating that “Powell’s termination can’t come quickly enough.” You may recall that Powell’s term as Fed Chair will expire in 2026. But there were concerns that President Trump could fire him, and that’s one of the reasons why the stock market was in a tizzy on Monday.

Thankfully, as we discussed in a recent Market 360 article, Trump quelled these fears in a press conference on Tuesday, where he stated that he has “no intention” of firing Powell.

It’s clear that Trump is frustrated that the Fed has not cut key interest rates this year, and he will likely blame the Fed and Powell if there is a recession. But for now, it looks like Powell will finish out his term as Fed Chair.

Green Shoot #3: Earnings Are Working

Now, the biggest green shoot is earnings.

The early quarterly earnings announcements are always the best, and that’s certainly been the case so far. Of the S&P 500 companies that have reported so far, 71% have exceeded analysts’ earnings estimates, posting an average 6.1% earnings surprise. FactSet now anticipates that the S&P 500 will achieve at least 7.2% average earnings growth for the first quarter.

But what really has me excited is the fact that early results have shown “earnings are working.” In other words, when a company with superior fundamentals beats analysts’ expectations, the stock rallies strongly.

Case in point: In Growth Investor, two of our stocks climbed 4% higher and more than 8% higher in the wake of their quarterly earnings beats on Tuesday. Then on Thursday, one of our stocks rallied 4% higher and another one jumped more than 8% after both companies topped analysts’ expectations.

So, we can count on wave after wave of better-than-expected sales and earnings to continue to propel fundamentally superior stocks higher in the upcoming weeks.

Get Ready for May Flowers

With tariff negotiations proceeding well, and tensions thawing between the U.S. and China, I expect trade barriers to continue to fall. And when it becomes clear that oppressive tariffs will not derail the U.S. economy, I look for the positive earnings environment and falling interest rates to serve as an incredible one-two punch that drives fundamentally superior stocks substantially higher.

The bottom line: Spring has now arrived – and it is time to cheer up, folks!

So, the question is… where do you find the best stocks with superior fundamentals?

That’s where my Growth Investor service comes in.

The fact is the stocks I recommend in this service remain backed by superior fundamentals. And the proof is in the numbers…

Our Buy List stocks are characterized by 24% average annual sales growth and 81.1% average annual earnings growth. That compares to the S&P 500, which is expected to achieve an estimated 4.6% revenue growth and a 7.2% average earnings growth rate for the first quarter.

I should also mention that analysts have increased earnings estimates by an average of 3.8% in the past three months. So, the analyst community remains very positive on these stocks.

To learn more about Growth Investor and gain immediate access to my latest picks, go here now.

(Already a Growth Investor subscriber? Click here to log in to the members-only website.)

Sincerely,

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

NVIDIA Corporation (NVDA)