US trade policy sparked volatility across all assets. President Trump’s unexpectedly harsh tariff announcement sent stocks plunging and the VIX soaring to 60 – reflecting Covid-19 pandemic-level highs. Markets recovered after a 90-day implementation pause, electronic product exemptions, and softer US-China rhetoric. The trade shock initially pushed 10-year Treasury yields to 4.6% before settling at 4.2% by month-end.
UK
- UK Equities: The FTSE 100 ended the month marginally negative (-0.7%), while the domestically focused FTSE 250 recovered from the tariff-induced drawdown (2.7%).
- Tariffs: The UK avoided the worst of Trump’s reciprocal tariffs due to having more of a service-based economy with a specialist manufacturing sector and a small trade surplus with the US.
- Inflation Falls: Inflation came in at 2.6% year-over-year, lower than in the previous month and below economist expectations.
- Economic Fears: April’s flash PMIs showed a deterioration in economic momentum. The composite index moved into contractionary territory (48.2), with both global and domestic headwinds arising from a combination of trade uncertainty and higher domestic taxes.
Global
- “Liberation Day”: Trump declared April 2nd as America’s economic Independence Day, introducing a 10% baseline tariff on imports plus “reciprocal tariffs” on nations running trade surpluses with the US.
- Chinese Market Rebounds: Willingness to negotiate down the massive 145% tariffs on Chinese goods eased tensions, while China’s robust Q1 GDP of 5.4% fuelled a stock market recovery.
- US Economy Cooling: April data revealed moderation with the composite PMI dropping to 51.2, primarily dragged down by weakening service sector performance.
- S&P 500 Extends Losing Streak: The index posted its third straight monthly decline (-0.7% in USD), while NASDAQ narrowly avoided the same fate thanks to stellar tech earnings.
- EU Dodges Trade War: Despite suspending retaliatory steel and aluminium tariffs to negotiate with the US, European equities finished down -0.4% for the month.
Fixed interest
- Bond Market Rollercoaster: US fixed income saw dramatic intra-month swings, powered by a potent mix of structural and cyclical forces.
- Inflation Surprise: March US inflation figures undershot forecasts, with headline CPI dropping to 2.4% and core CPI easing to 2.8% year-over-year.
- ECB Pulls the Trigger: The European Central Bank delivered its anticipated 25 basis point cut, bringing rates to 2.25%, with signals of future reductions bolstering government bond performance.
- Spreads Spike: Driven by rising recession fears, credit spreads widened sharply in April (higher risk of default), but reversed course after Trump paused tariffs and corporate earnings stayed strong.
Other
- Gold Shatters Records: Gold was the major beneficiary of April’s uncertainty, marking a new all-time high at $3,500 on April 22nd.
- Commodities Plunge: Metal and oil prices plummeted 16% as recession concerns intensified and OPEC members unexpectedly moved to increase supply.
With the full economic impact of the new tariffs still to be felt and uncertainty remaining high, volatility is likely to continue. This demands a disciplined and diversified approach to investment portfolios.
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This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
