The Midterm Miracle and Liberation Day

The 2022 bear market was a Fed-driven affair. From January 3 to October 12, the S&P 500 fell 25.4% as the Federal Reserve raised rates from 0% to 3.75% — seven hikes in eight months, including four consecutive 75-basis-point increases. The market wasn’t worried about banks failing or economies shutting down. It was worried about one thing: how high would rates go?

By November, the consensus view was grim. Inflation was still above 8%. The Fed was signaling that rates would need to go above 5%. Many strategists predicted a recession in 2023. The S&P had produced 25 trading days with moves exceeding ±2.5% — a level of volatility not seen since 2020 — but not a single day had crossed +4%.

Then, on the morning of November 10, the Bureau of Labor Statistics released the October CPI report. Headline inflation came in at 7.7%, below the consensus estimate of 8.0%. Core CPI rose 0.3% month-over-month, below the expected 0.5%. It was the first genuinely positive inflation surprise in over a year.

The market’s reaction was explosive. The S&P surged from 3,748.57 to 3,956.37, a gain of +5.54%. It was the largest single-day gain since April 2020 and the fifth-largest in the 21st century. The timing mattered: the midterm elections two days earlier had delivered a split Congress (Republicans took the House, Democrats held the Senate), which markets historically favor for the gridlock it produces.

Breadth was extraordinary: 6,856 of 7,773 stocks advanced (88.2%), with an average gain of 4.62% and a median of 4.21%. The leaders were high-beta technology and growth names that had been the worst performers of the bear market: Carvana (+31.62%), Cloudflare (+24.92%), AppLovin (+18.49%), Shopify (+18.16%), and NVIDIA (+14.32%). The 30 basis points between actual and expected CPI translated into trillions of dollars of market value created in a single session.

On April 2, 2025, the administration announced a sweeping “reciprocal tariff” regime under what it called “Liberation Day.” The plan imposed tariffs of 10% to 50% on virtually all US trading partners, with rates calibrated to each country’s bilateral trade deficit with the United States. China faced tariffs above 100%. The European Union, Japan, South Korea, Vietnam, and dozens of other nations faced rates far exceeding anything in modern trade history.

The market’s reaction was immediate and severe. On April 3, the S&P fell 4.84%. On April 4, it fell another 5.97%. In two days, the index lost more than 10% of its value — the sharpest two-day decline since March 2020. Supply chain disruption fears, retaliation threats, and recession probabilities dominated every discussion. The S&P dropped from 5,670.98 on April 2 to 4,982.78 on April 8 — a decline of 12.1% in four trading days.

Then, on the afternoon of April 9, the president posted on social media that he was authorizing a 90-day pause on most reciprocal tariffs, reducing the rate to a flat 10% for all countries except China. The market response was one of the most violent in recorded history.

The S&P surged from 4,982.78 to 5,456.89, a gain of +9.51% — the third-largest single-day gain in S&P 500 history, behind only October 13, 2008 (+11.58%) and October 28, 2008 (+10.79%). In absolute dollar terms, the S&P added more market capitalization in a single day than in any prior session in history.

Breadth was overwhelming: 8,520 of 9,659 stocks advanced (88.2%), with a median gain of 6.55% and an average of 6.71%. The symmetry with the November 2022 rally was striking — both produced exactly 88.2% advancing stocks, despite occurring under entirely different circumstances.

One name appears at the top of both rally days: Carvana (+31.62% on November 10, 2022; +25.02% on April 9, 2025). Carvana is the market’s purest high-beta growth name — a company that lives or dies by interest rates, consumer confidence, and market sentiment. Its appearance as the top mover on both the biggest rally days of their respective eras is a perfect encapsulation of how these rallies worked: the most punished names bounced the hardest.

On April 9, 2025, the semiconductor complex dominated. Arm Holdings (+24.20%), AMD (+23.82%), NVIDIA (+18.72%), Broadcom (+18.66%), Intel (+18.75%), and Micron (+18.81%) all surged as the tariff pause removed the immediate threat of supply chain disruption for the most globally interconnected industry in the economy. Tesla (+22.69%) rallied both on tariff relief and on its heavy exposure to China manufacturing.

The April 9, 2025 rally sits third on the all-time list — and it is the only one of the top six that was triggered by a policy reversal rather than a crisis response. The 2008 rallies followed emergency bank bailouts. The COVID rallies followed a national emergency declaration and a $2.2 trillion stimulus bill. The Black Monday bounce followed the crash itself. April 9, 2025 followed a social media post announcing a tariff pause. The trigger was smaller. The rally was not.

The November 2022 and April 2025 rallies share three features that distinguish them from every other +4% day in this series.

Policy-created crises, policy-resolved rallies. In 2008, the crisis was organic — bad mortgages, overleveraged banks. The government intervened to fix a problem it didn’t create. In 2022 and 2025, the government was both the source of the crisis and the source of the resolution. The Fed’s rate hikes created the 2022 bear market; the CPI data suggesting the hikes were working ended it. The tariffs created the April 2025 selloff; the tariff pause ended it. Markets have learned to price government action as the primary driver of risk, not just the responder to it.

Technology as the fulcrum. In 2008, the movers were banks. In 2020, they were airlines and restaurants. In 2022 and 2025, they were technology companies. NVIDIA, AMD, and semiconductors appeared in both rally days. This reflects the growing dominance of tech in the S&P 500 — by 2025, the “Magnificent Seven” technology stocks represented roughly 30% of the index. When the market moves 9%, tech moves 18%.

Identical breadth, different magnitudes. Both days produced exactly 88.2% advancing stocks. But the April 2025 rally (+9.51%) was nearly double the November 2022 rally (+5.54%). The median stock gained 6.55% versus 4.21%. The breadth was the same, but the intensity was far greater — reflecting the severity of the tariff shock relative to the inflation overshoot.