The S&P 500 ETFs' Historic Run Ends Amid Market Turbulence

The S&P 500 ETFs’ nine-day winning streak—a run that marked the longest consecutive daily gains since November 2004—came to an abrupt end on May 5, 2025. This milestone concluded on a down note as the index closed 0.64% lower, snapping its historic trajectory and underscoring the growing volatility plaguing markets. The decline followed a rollercoaster quarter defined by trade wars, Federal Reserve uncertainty, and a stark shift in investor preferences toward active management.

The End of the Streak: A Perfect Storm of Risks

The winning streak, which had erased early April losses triggered by President Trump’s tariff announcements, ended amid mounting concerns over U.S. trade policies and economic fundamentals. Key catalysts included:

1. Trade Policy Uncertainty: Trump’s threat of a 100% tariff on foreign-made films and unresolved disputes with China intensified market anxiety. Investors feared renewed trade tensions, particularly as a 90-day tariff pause was set to expire in July 2025.
2. Federal Reserve Hesitation: Despite a weaker-than-expected Q1 2025 GDP reading (-0.3%) and calls for rate cuts, the Fed maintained a cautious stance, citing inflation risks exacerbated by tariffs.
3. Economic Data Mixed Signals: While April’s jobs report (177,000 jobs added) beat forecasts, broader indicators like consumer confidence and manufacturing activity remained subdued.

The Shift to Active ETFs: A Structural Turnaway from Passive Dominance

The end of the S&P 500’s streak coincided with a notable shift in investor behavior. For the first time in decades, actively managed ETFs captured 34% of total ETF flows year-to-date in 2025, compared to passive funds’ declining share. This trend reflects skepticism toward broad-market exposure in volatile environments:

• Income and Risk Management: JPMorgan’s income-focused ETF (JEPI) and buffered ETFs—products that limit downside exposure—appealed to registered investment advisors (RIAs) seeking stability.
• Retail Experimentation: Younger investors flocked to leveraged/inverse ETFs targeting single stocks like Tesla or Nvidia, pouring $10 billion into such products YTD.

Why This Matters for Investors: Volatility and Long-Term Discipline

The S&P 500’s 14.02% drop from its February 2025 peak—placing it in correction territory—highlights the risks of timing the market. Advisors warn that missing key recovery days (e.g., the 10% rebound after a 5–7% decline) can erase years of gains. For instance, JPMorgan analysts noted that investors who sold during the April selloff would have forgone a full recovery by late April.

Historical context further underscores the need for patience:
- The 2025 drawdown pales compared to the S&P 500’s 57% plunge during the 2007–2009 crisis.
- Since 2022, markets have experienced four corrections (10%+ declines), underscoring heightened volatility.

The Road Ahead: Navigating Uncertainty

Looking forward, three factors will dominate:
1. Trade Policy Outcomes: A resolution—or escalation—of tariff disputes with China could redefine investor sentiment by mid-2025.
2. Fed Rate Decisions: With inflationary pressures lingering, the central bank’s next moves will influence equity valuations.
3. Active vs. Passive Dynamics: While passive ETFs like SPY and VOO remain dominant in assets under management (~80–90%), active strategies’ rising popularity may signal a lasting shift toward tactical allocations.

Conclusion: Volatility Is Here to Stay—Adapt or Retreat

The end of the S&P 500 ETFs’ historic streak is not merely a technical milestone but a wake-up call. Markets in 2025 are navigating unprecedented crosscurrents: trade wars, Fed uncertainty, and a bifurcated investor base split between cautious institutional players and risk-seeking retail traders.

Data reinforces this divide:
- The S&P 500 remains 8% below its February peak, despite a partial recovery.
- Active ETFs now account for over 2,000 products globally, signaling a structural shift from passive dominance.

For investors, the lesson is clear: in a volatile era, diversification and discipline—not chasing streaks—are the keys to survival. As JPMorgan’s Jon Maier noted, “The market’s noise is louder than ever, but long-term outcomes still reward patience.” In 2025, that patience may be tested like never before.