More speculative, lower quality market segments driving S&P 500's returns since April lows

[People silhouettes on American stock market index S P 500 - SPX]
Skywalker_ll

After President Donald Trump's reciprocal tariffs announcement sent the U.S. market into a tailspin in April, Wall Street's benchmark S&P 500 index (SP500 [https://seekingalpha.com/symbol/SP500]) has rebounded remarkably, surging nearly 30% since "Liberation Day." However, Charles Schwab noted that this bounceback has been largely driven by "more speculative, high volatility, lower quality" segments of the market.

Following Trump's April 2 bombshell, the S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) plummeted, and over the course of four straight trading days, Wall Street's premier gauge swiftly slipped into correction territory and, briefly, into bear market territory. The index bottomed out at 4,982.77 points on April 8, following which it began a slow and arduous journey back to record highs.

The S&P (SP500 [https://seekingalpha.com/symbol/SP500]) as of its last close is +29.4% since its April 8 level.

"Rather than broad-based participation, this year's leadership has been heavily skewed toward more speculative, high volatility, lower quality segments of the market, including baskets like nonprofitable tech, retail favorites, meme stocks… yes, they're back… while classically defensive areas have had duller performance," Liz Ann Sonders, chief investment strategist at Charles Schwab, said last Friday.

See this chart of the performance of Goldman Sachs and UBS baskets tracked by Bloomberg as of August 18, shared by Sonders on X (formerly Twitter) on Tuesday:
[Performance of selected market baskets]
Charles Schwab, Bloomberg

Sonders noted that "these higher volatility, lower quality themes were hammered during the mid-February to early April period" but that their rebounds had "been extraordinary."

"Our take and advice around this… I'm going to use a little bit of trader lingo here… is to fade the lower quality winners, and continue to lean into higher quality factors when it comes to picking stocks," Sonders added.

Wall Street on Tuesday slid as market participants remained cautious amid a retail earnings deluge and ahead of the Jackson Hole symposium later this week. Here are some exchange-traded funds that track the benchmark S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]): (NYSEARCA:SPY [https://seekingalpha.com/symbol/SPY]), (NYSEARCA:VOO [https://seekingalpha.com/symbol/VOO]), (NYSEARCA:IVV [https://seekingalpha.com/symbol/IVV]), (NYSEARCA:RSP [https://seekingalpha.com/symbol/RSP]), (NYSEARCA:SSO [https://seekingalpha.com/symbol/SSO]), (NYSEARCA:UPRO [https://seekingalpha.com/symbol/UPRO]), (NYSEARCA:SH [https://seekingalpha.com/symbol/SH]), (NYSEARCA:SDS [https://seekingalpha.com/symbol/SDS]), and (NYSEARCA:SPXU [https://seekingalpha.com/symbol/SPXU]).

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