3 lessons valuations guru Aswath Damodaran learnt from April's wild market ride
April 2025 may have ended with major indices right where they began, but to valuations expert and NYU finance professor
Aswath Damodaran
, the calm finish masked a month of deep market churn, revealing three hard-earned lessons for investors: markets are more resilient than pundits give them credit for, momentum is still a powerful force, and policy can — and did — bend to Wall Street's will.
As market turbulence roiled global equities in April, renowned valuations expert and NYU finance professor Aswath Damodaran shared key lessons learned from the month's extraordinary volatility. In his blog published on Saturday, May 3, 2025, Damodaran dissected the unexpected resilience of equity markets amid escalating geopolitical risks, a potential U.S. Federal Reserve shakeup, and mounting tariffs.
In his latest blog post published Saturday, Damodaran dissected dissected the unexpected resilience of equity markets amid escalating geopolitical risks, a potential U.S. Federal Reserve shakeup, and mounting tariffs- in a month which he says 'felt like a crisis' in its opening days — with $9 trillion in global equity market cap wiped out — before a stunning reversal that saw equities claw back almost all of their losses.
'Market resilience, market power, and the return of momentum — those were the defining characteristics of April 2025,' Damodaran said.
Market resilience
Despite initial market losses of nearly 10% in the first few days, equities rebounded, and by month's end, the S&P 500, NASDAQ, and MSCI World Index were all within 1% of their start-of-month levels.
"If you had given a group of macro economists or market strategists just the news stories that came out during the course of the month and asked them to guess how they would play out in market reaction, almost none of them would have guessed the actual outcome," Damodaran said, highlighting the market's capacity to absorb shocks and surprise even seasoned experts.
One of the clearest shifts in sentiment, Damodaran said, was the resurgence of momentum. After lagging in the first quarter, the best-performing stocks of 2024 outpaced the worst by more than six percentage points in April. The so-called 'Mag Seven' — large-cap tech firms emblematic of growth and momentum — collectively regained $1.55 trillion lost in early April.
That turnaround, Damodaran suggested, 'pushed markets back into their 2024 ways,' with growth, technology and momentum reasserting dominance.
Market power
The valuations expert reserved some of his sharpest observations for the political theater that rattled investor trust — and the markets' role in influencing it.
The month saw U.S. sovereign CDS spreads jump 38%, a reflection of growing skepticism about American fiscal credibility, amid rumors of replacing Federal Reserve Chair Jerome Powell. But markets appeared to force policymakers' hand.
Damodaran argued that the administration's quick retreat on both tariffs and Powell's potential ouster shows how 'market power' shaped outcomes. 'An administration that has been impervious to Wall Street journal editorials, warnings from economists and counter threats from other governments has been willing to bend to market selling pressure,' he wrote.
Market unpredictability
Perhaps most strikingly, Damodaran stressed the unpredictability of the markets and how this challenged the value of active investing during times of volatility. As markets swung between fear and greed, the role of fund managers and financial experts became a topic of intense debate. Many advocates of active investing claimed that their timely interventions would have safeguarded portfolios. However, Damodaran argued the opposite, asserting that investors who followed expert advice likely suffered more losses. "The extent of damage that April did to investor portfolios was directly proportional to how much time they spent watching CNBC and listening to (or reading) what market experts told them to do," he said. Damodaran, who refrained from making market-timing decisions, instead used the volatility as an opportunity to add stocks like BYD to his portfolio, emphasizing his contrarian approach.
Beneath the surface
Outside equities, Damodaran noted, the bond market appeared calm — but the U.S. yield curve's odd U-shape and the jump in default spreads suggest lingering investor unease. The U.S. dollar weakened further, and commodities, particularly oil, failed to rebound with equities — signaling expectations of slowing global growth.
Meanwhile, gold and bitcoin surged 5.3% and 14.1% respectively, not as safe-haven plays, Damodaran argued, but due to declining faith in fiat institutions.
In Damodaran's view, the month's lesson is that even amid chaos, the crowd often gets it more right than the experts. Whether April's final three weeks were a blip or the start of a broader shift, he said, remains to be seen.
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