Market Overview

Summary of world markets in April

April was dominated by President Trump’s extraordinary “Liberation Day” speech and its aftermath. In response to the shock tariff announcements, risk assets plunged, and safe havens rallied. Whilst dismissing the turmoil in equity markets, it was vulnerabilities within the US treasury market that persuaded the President to issue a 90-day pause to proceedings.  Some semblance of calm was restored, and, by the end of the month, risk assets had recovered much of the lost ground. Bond markets also endured high volatility but, ultimately, yields declined as investors focused upon slowing economies and likely interest rate cuts.

Equity markets plunged after President Trump’s “Liberation Day” speech and volatility spiked.  The VIX measure of implied volatility reached a level of 60, the highest since the pandemic.

Despite wild swings in the course of the month, the main US index was only modestly lower by the end (in local currency). At one point, the main index stood on the brink of a bear market, recording a plunge of almost 20% from the February peak and suffering its worst week since 2020. On “Manic Monday”, US indices opened with another major decline, before surging on a rumour about tariff delays, and then crashing anew as the rumour was denied. A sense of relative calm returned in the second half of the month as the President softened his approach to tariffs and announced a 90-day pause. Over April as a whole, the Dow Jones Industrial Average Index  fell by 3.2%, For UK sterling investors, the returns from unhedged US dollar-based holdings were held back by the weakness of the American currency.

Other markets also recovered much or all the ground that was lost following “Liberation Day”.  The main UK and European equities registered modest declines (in local currency), while the Japanese market was slightly positive. In the UK, there was some welcome relief for investors in mid and small-cap stocks, which chalked up a positive month following a miserable start to the year. Having plummeted by over 10% between the end of March and 9 April, the FTSE 100 Index  ended April only 1% lower, while the FTSE 250 Index  – whose constituents tend to be more domestically focused – rose by 2.1% over the month.

Asian and emerging indices were outperformers this month (in local currency – US dollar weakness weighed upon sterling-based returns). With US tariffs reaching 145% at one point, China was firmly in the eye of the storm but, even here, equities recovered a good deal of ground as an apparent willingness to negotiate eased the worst fears. Elsewhere, countries such as Mexico and Brazil performed well as they were seen as relative tariff “winners”.

Broadly, growth stocks outperformed value stocks, with poor performance from the energy sector weighing upon value indices.

Federal Reserve Chair, Jerome Powell, risked President Trump’s ire by warning that the economic fallout from the trade war could be worse than expected and indicated a “wait-and-see” approach to interest rates. Despite this, traders priced in several rate cuts over the remainder of the year.  Later, President Trump commented that Mr Powell’s termination from his position “can’t come fast enough”, although later he softened his stance. The European Central Bank cut rates by 0.25% (to 2.25% for the deposit rate) due to growing confidence that inflation is on track to return sustainably to the 2% target. The Bank also acknowledged that growth prospects have weakened but made no commitment to further cuts. The Bank of Japan kept its short-term interest rate unchanged at 0.5%, amid growing concerns about the impact of tariffs on global economic growth.

Broadly, government bond yields fell as markets priced in the likelihood of interest rate cuts.  However, there was high volatility along the way, as sovereign yields fell sharply in tandem with the tariff-inspired equity falls early in the month, before rising sharply again as risk assets staged a recovery.

The UK gilt market delivered a positive total return, with the longer end of the maturity curve outperforming. The market was bolstered by a decline in inflation and data pointing to weaker UK economic activity. Four interest rate cuts have been priced in for the remainder of 2025.

Amid the tariff turmoil, the US treasury market began to crack as the exit from US assets accelerated. Observing that the bond market had been “getting yippy”, the President’s 90-day tariff pause brought relief to investors. This episode highlighted that confidence in US sovereign paper can no longer be taken for granted, bringing into sharper focus the issues of the country’s burgeoning debt burden and the willingness of foreigners to buy and hold that debt.

There was also elevated volatility in credit markets.  Spreads widened early in the month, but, in tandem with other risk assets, prices retraced some of their losses as the month went on.  Market participants continue to point to the fact that spreads remain narrow by historical standards, particularly in the context of the current macro-economic uncertainty. The clear preference is for securities backed by steady cash flows/assets, with caution towards cyclical businesses and those seen to be most exposed to trade disruptions.

In tandem with the pressure upon risk assets, the oil price declined. However, unlike other risk assets, the oil price did not recover, weighed down by concerns about global economic growth and expectations of increased supply from OPEC+.

The gold price surged during the tariff angst as more investors reached for safe-haven assets.  After a such an extended rise in its price, gold was vulnerable to a period of profit-taking, which duly arrived in the second half of the month. Nonetheless, the gold price ended the month well in positive territory.

Trade tensions and growing concerns about the economic consequences of tariffs continued to weigh upon the US dollar, as did the continued exit from US assets generally.