The bad news? The first quarter, which wrapped up yesterday, marked the S&P 500’s worst quarterly performance since 2022. The good news? Q2 has a lot of room for improvement.

By the end of 2024, the S&P 500 was roaring: the AI trade was booming, the Fed had lowered rates, and investors foresaw a lighter regulatory touch under the second Trump administration.

But the new year hit Wall Street like a truck. President Trump's heavy-handed tariff policies spooked investors, while key economic indicators showed that the labor market was slowing at the same time that consumer sentiment was cooling. All in all, the S&P 500 declined 4.6% over the quarter, while the Nasdaq fell nearly 11%, and the Dow lost just 1.3%.

However, there were some bright spots over the quarter. The highest-flying sector was energy, which climbed 9.3%, with two recession-proof sectors—healthcare and utilities—taking second and third place, respectively.

But the best-performing stocks in the S&P 500 over the quarter were all consumer staples that never go out of fashion—even when there’s the threat of the R-word. The best stock of Q1, CVS Health, soared 51%, while Philip Morris International climbed 31%, and Newmont Corporation gained 29%.

On the flip side, the consumer discretionary sector plummeted 14%, while information technology sank 12.8%. Stocks in these two sectors saw some of the steepest drops last quarter: Deckers Outdoor Corporation sank 46%, Tesla fell 37%, while ON Semiconductor Corporation also lost 37%.

And as a hedge for uncertainty, gold had a glittering Q1, gaining 19% throughout the first three months of the year for its best quarter since 1986.

Better days ahead—or abroad?

We’ll be honest: The factors that triggered Q1’s market meltdown haven’t gone away. But there are some strategies that analysts say could help protect you from the chaos.

One idea is to move out of US stocks and gain exposure to international markets. Many investors have been shifting their money to relatively cheaper European stocks, hoping that those are set for a boom while the US market continues to contend with tariff uncertainty.

The tactic has proved prescient: The Stoxx Europe 600 Index outpaced the S&P 500 by 9.8% in Q1, its biggest lead since 2015, according to Dow Jones data.—LB

🟢 What’s up

• Newsmax continues to make waves, soaring another 179.01% a day after the conservative media outlet’s explosive debut on the NYSE.
• Tesla rose 3.59% a day ahead of its Q1 deliveries announcement, which some analysts believe will be painfully low due to consumer backlash that spurred a 37% sales decline in France this quarter.
• Speaking of vehicle deliveries, GM eked out a 0.53% gain following a solid delivery report.
• CoreWeave is staging a comeback, roaring 41.77% higher less than a week after its tepid IPO.
• Roblox rose 4.63% on the news that it has teamed up with Alphabet to help advertisers reach the gaming company’s core Gen Z audience.
• PVH Corp. popped 18.08% after the parent company of brands like Tommy Hilfiger and Calvin Klein reported better-than-expected fourth-quarter earnings.
• Hims & Hers Health gained 5.21% on the announcement that it will sell Eli Lilly's weight-loss drug Zepbound and diabetes treatment Mounjaro on its telehealth platform.
• MicroStrategy (or just Strategy, if you’re too cool for school) made its biggest bet on bitcoin of the year, purchasing $1.9 billion worth of the crypto last week. The stock climbed 6.16% today.

What’s down

• Johnson & Johnson fell 7.59% following a bankruptcy judge’s ruling to deny the company’s $10 billion settlement proposal for thousands of lawsuits alleging its talc products caused ovarian cancer
• ON Holding is losing its CEO…leaving the athletic footwear company with just one CEO instead of two. Shares fell 2.82%.
• Turbulence ahead: Airline stocks stumbled following an industry-wide downgrade from analysts at Jefferies citing high tariffs and low consumer confidence. American Airlines fell 2.37%, Delta Air Lines lost 2.71%, United Airlines dropped 1.23%, and Southwest Airlines shed 5.93%.

The AI trade may be faltering, but SoftBank didn’t get the memo.

The Japanese investment behemoth just poured $30 billion into OpenAI, the creator of ChatGPT. With a total of $40 million raised, that makes this the largest private tech funding round ever, according to CNBC.

What’s more startling: This new round of funding values the AI startup at $300 billion, or more than international oil conglomerate Chevron, which has a market cap of $293 billion. Put another way, it’s also worth two Pfizers ($150 billion market cap), three Nikes ($95 billion cap), or six Targets ($47 billion market cap).

Management plans to use this latest batch of money to fund its plans for Stargate, the massive AI infrastructure buildout announced back in January. But the cash comes with a caveat: SoftBank can cut its total funding down to $20 million if OpenAI doesn’t become a for-profit entity by December 31, a transition that has sparked some serious drama, including a lawsuit by OpenAI cofounder Elon Musk.

If you’ve been anywhere near a TV or social media platform in the past year, you’ve heard President Trump and his supporters blame DEI (diversity, equity, and inclusion) for just about anything and everything that goes wrong.

So it came as no surprise that during his first week in office, Trump signed a slew of executive orders dismantling DEI in both the private and public sectors, including terminating DEI government positions and wiping out equity-related grants.

Much of corporate America quickly fell into lockstep, rolling back entire programs created just a few years ago aimed at making workplaces more inclusive and hiring people from historically underrepresented groups.

For instance, Google announced it was ending its DEI hiring targets in February, with CEO Sundar Pichai telling employees that while Google wants to have a “workforce that represents that diversity” it also has to “comply with local laws,” CNBC reported.

To those corporations that have not fallen in line, Trump’s administration is sending a clear message. On Friday, the chairman of the FCC announced he had opened a probe into Disney's DEI program. Conservative activists led by Stephen Miller have drawn up a list of 45 companies that have touted DEI efforts over the past few years, according to Bloomberg.

Time for a rebrand?

Many companies are not necessarily throwing out the actual core values of DEI, but rebranding to avoid the optics of the term.

For example, JPMorgan said this month it was replacing the “equity” in DEI with “opportunity.” Only time will tell whether one letter will spare the bank from the Trump administration’s ire.

Zoom out: While some are in favor of companies focusing more on profit than social issues, others worry that straying from the tenets of DEI could hurt companies' bottom line.

“The DEI rollbacks have raised concerns among some investors, as many employers believe that diversity is good for business,” explained Hortense Bioy, Head of Sustainable Investing Research, Morningstar Sustainalytics. “In the months ahead, investors will have the opportunity to closely examine the disclosure of DEI initiatives as companies have just started to update their corporate reporting.”—LB

• NYSE Texas has its first stock: Trump Media & Technology Group.
• Chipotle uses 132 million pounds of avocados every year, and tariff fears sent the company on a 7-year quest to source them from anywhere but Mexico.
• Federal government layoffs soared from 4,000 to 22,000 last month, their highest monthly total since November 2020.
• One industry benefiting from tariffs: Car dealerships, which are seeing customers flock to buy autos ahead of Liberation Day.
• Larry Fink’s annual letter is out, with the BlackRock CEO talking about private credit, infrastructure investing, and why Americans need $2,089,000 to retire comfortably.
• Balenciaga now sells a coffee cup for over $5,500. Yes, you read that right.

There are a handful of earnings reports to watch tomorrow from the likes of BlackBerry, UniFirst, and RH (formerly Restoration Hardware). We’ll also get some more insight into the labor market with the ADP employment report, a look at private employment across the country.

But all eyes are on the White House tomorrow, for what President Trump has deemed Liberation Day. A wide swath of levies are set to go into effect, and while investors may be hoping for some sort of 11th-hour deferral, it’s likely too late to stop these economic dominoes from falling.