April was an explosive month as President Trump’s ‘liberation day’ on 2nd April caused major market turmoil.
The trade tariff war was more hostile than markets had predicted and most indices went tumbling as the news of the tariffs broke. Trump quickly rowed back on many of his ‘counter tariffs’, allowing many markets to recover lost ground quickly, but their remains an underlying lack of confidence in US markets in particular. An ongoing heightened trade war with China, and concerns around Trump’s unpredictability, continue to cast a shadow over financial markets.
With that in mind we’ve started this month’s round up with the US at the top of the running order.
United States
Using the S&P 500 alone, Trump’s first 100 days in office second time around has been the worst for the US stock market since Gerald Ford in 1974. The S&P 500 has lost over 7% since inauguration day. For balance, and as we have often said that markets are not political, he was in positive territory for the first 100 days of his first term. On the 3rd and 4th April, the S&P 500 and Nasdaq experienced their largest two-day percentage declines since the COVID-19 pandemic, with the Dow Jones shedding over 4,000 points.
Trump has dominated the 24-hour news cycle throughout April, so we won’t dwell on all the details, but it is worth adding some context that might help explain why he doubled back on his decision to impose the additional ‘counter tariffs’ and what he may have been trying to do by destabilising equity markets.
It’s easy to view stock market volatility as the reason why Trump quickly doubled back on his promise to keep country-specific trade tariffs in place.
For decades, US treasury bonds and the dollar have been seen as safe havens for investors in times of stock market volatility. In theory, there should have been a flight to US bonds when US equities tumbled on ‘liberation day’. Not only did that not happen, there was a mass sell off of US bonds. Yields rising, as they did sharply, means values are falling, a clear indication that confidence in US government issued bonds was severely dented by Trump’s tariff announcements.
There is $9.2trn of US government debt to refinance later this year. A mass purchase of US bonds would have reduced government borrowing costs, and initially it looked like this was working in Trump’s favour. This changed by Monday 7th April, and by Wednesday 9th April, thirty-year treasury yields hit 4.92%, their biggest three-day jump since 1982.
If bond yields had dropped, the Fed would be under more pressure to drop interest rates again. Trump has been publicly and unsuccessfully applying pressure on Fed chair, Jerome Powell, to do just that. Mortgage rates would drop and Trump’s refinance of government debt would look more comfortable. That may have been the plan, and if it was, it hasn’t worked. Investor sentiment is now low for a President who was elected on the strength of his financial competence. Fears of a recession have heightened and the news at the very end of April that the US economy contracted in Q1 will add to that fear.
In mid April, the International Monetary Fund (IMF) lowered its global growth forecast and revised down the US’ growth projection for 2025 from 2.7% to 1.8%, citing intensifying downside risks. It also raised the probability of a US recession to 40%. In its commentary, the IMF emphasised that policymakers around the world now face increasingly difficult trade-offs between fiscal sustainability, economic re-acceleration, and rising spending pressures.
Despite a brief market rally, when he announced the 90-day pause on additional tariffs, the persistence of the flat 10% tariff on all countries, the uncertainty around what will happen next, and the prospect of an escalated and protracted trade war with China does not bode well for US equity markets in particular. Financial markets demand predictability to thrive. He cannot be removed and does not need to face the electorate again, so it is difficult to know how he will respond as he tries to recover his reputation.
Whilst he may still be popular in the US, he is not elsewhere in the world. Politicians viewed as ‘anti-Trump’ are benefiting from this in the short term, as evidenced by the election of for UK Bank of England Governor Mark Carney as Prime Minister in Canada.
Trump’s usual style is to announce big changes and then row back from them, and ‘liberation day’ followed that pattern. There has been a drip feed of more positive news throughout late April as tariffs have been loosened in specific sectors such as technology and car manufacturing.
UK
During the turmoil of early April, the the Office for National Statistics (ONS) report that the UK economy expanded by 0.5% in February, with the services sector having a strong month, passed by with relatively little comment.
As the new, increased, minimum wage kicked in, along with increased National Insurance contributions for employers, job vacancies fell, suggesting that the UK labour market was weakening. However, the ONS warned caution on these results and confirmed that the UK unemployment rate remained at 4.4%, roughly the same as the previous three months.
Both UK equity and bond markets reacted negatively to the tariff announcement but had both settled down by the end of the month. The FTSE 100 was down on the month but remains in positive territory on the year to date – a reminder that steep market drops usually result in quick recoveries, and that sometimes its just better not to watch the news.
Both Prime Minister Keir Starmer and his Chancellor Rachel Reeves have had a tough start to their term since the 2024 election. Whilst nobody wants tough trading conditions, Trump was the clear cause of it in April and his domination of the news headlines may have taken some pressure off the government.
Starmer’s ratings have improved of late. He has survived the difficult balancing act of appeasing the Trump administration, resulting in the UK being set the minimum level of tariffs, whilst visibly supporting those less aligned to US policy, such as President Zelensky. There remains a longer-standing 25% US tariff on UK car imports which is the subject of some negotiation, with tax cuts to US tech firms one of the bargaining chips.
The current Bank of England Governor, Andrew Bailey, does not appear to be unduly concerned with April’s turbulence. He views tariffs as a hindrance to growth but does not believe we are close to a UK recession. Another cut to interest rates is expected on 8th May.
Europe
The Eurozone saw equity markets tank and recover in much the same way as the rest of the world at the start of April. The STOXX Europe 600 index fell by 2.6% on April 3 and an additional 3.1% on April 4, culminating in an 8.4% weekly loss – the worst in five years. The following week saw a further 6% drop, with a 4.54% decline on April 7. By the end of the month it was 2.2% down, and 3.34% up year to date.
Relations between Trump and Europe are much more fraught than with the UK, and the April 2nd tariffs were higher. Despite the retaliatory tariffs imposed by the Eurozone on the US, they benefitted from the US policy shift – a reversion to the flat 10% minimum tariff.Perhaps the Trump administration did not want a trade war with both China and Europe at the same time.
Contrary to typical patterns during trade disputes, the euro has been steadily appreciating by around 10% since early March. This surge further strained European exporters. Companies within the STOXX 600 derive about 60% of their revenues from abroad, with half of that from the U.S. The stronger euro compounded the challenges posed by tariffs, has caused earnings pressures for major firms like Unilever, SAP and L’Oréal.
It could cause a recession for Germany, the Eurozone’s biggest exporter. German spending has played a significant part in lifting the euro to a record high in April.
“If you have much weaker growth and a much stronger euro, that’s a bit of a double whammy for Europe,” said Emmanuel Cau, head of European equities strategy at Barclays.
Far East
The result of the 2nd April tariffs and subsequent climb down, or ‘pause’ depending on how you view it, is a clear head-to-head trade battle between the US and China.
China is projecting confidence, and whilst it has brought forward existing spending plans, it intends to hold back on throwing new money into the economy at this stage. Some commentators have taken this as China’s assumption that America will blink first in what could become a protracted trade war. They remain committed to their 5% growth plan, despite the significant headwinds they now face.
The potential impact is impossible to ignore as it has already rippled through China’s factories and export reliant industries. The manufacturing sector contracted in April, with the Purchasing Managers’ Index (PMI) falling to 49.0, the lowest in nearly two years. There have been job cuts as orders have dropped.
China may well believe it has a higher pain threshold than the US, and hope that inflated prices passed onto the public will force the US government’s hand, but cracks are starting to appear in the Chinese economy which will be hard to cover up the longer the trade war drags on. There has been an attempt to ease consumer pain. China has granted tariff exemptions on pharmaceuticals, semiconductors and aircraft engines, and is rumoured to have discreetly added other US goods which are exempted to the list and privately notified the relevant businesses concerned.
On 30th April, China enacted the Private Economy Promotion Law, aimed at boosting confidence in the private sector and strengthening its role in the economy. China’s private sector contributes over 60% of economic output and the law purports to ensure fair competition and promote growth, alongside other measures to promote the private sector.
In April 2025, core inflation in Japan surged to 3.4% year-on-year, its highest level in two years – primarily driven by rising food prices and reduced government energy subsidies. This surpasses market expectations and March’s 2.4% rate, signaling growing price pressures.
As expected, the Bank of Japan kept its policy rate unchanged at 0.5%, but it significantly reduced its GDP growth forecasts for 2025 and 2026 due to increasing uncertainties surrounding global trade. The central bank now expects GDP growth of just 0.5% in 2025, down from a previous forecast of 1.1%.
Emerging Markets
The diversity of economies grouped together under ’emerging markets’ makes sweeping statements tricky, as some are more linked to US economic policy than others, but on the whole a great deal of resilience was shown in emerging markets during April. The IMF adjusted its global growth forecast to 2.8% for 2025, with emerging markets expected to grow at a faster pace than developed economies. Inflation in many of those countries showed signs of moderation, providing central banks with room to adjust monetary policies to support growth.
Leading the pack were India and Brazil. India continued to attract investor interest due to robust economic growth and increasing integration into global supply chains. Brazil benefited from strong commodity exports and high real yields, making it appealing to yield-seeking investors.
One beneficiary of the trade wars could be South America, with 10 of the 12 states on the continent set the lowest level of 10% on 2nd April and the remaining two now also on 10%. China, as well as Mexico and Canada, will look elsewhere for it’s imports and Brazil in particular could be a beneficiary of this.
Conclusion
If US trade tariffs cast a shadow across global markets in March, they unleashed a downpour at the start of April. It would be wrong to pretend that all losses had been reversed by the end of the month and there is nothing to see here. US equities are a core component of most portfolios and there are bumpy times ahead for markets still to come. But many indices remain up for the year to date, and it is another clear example of how quickly markets bounce back from very steep declines.
The absolute worst strategy for any investor is to sell when the market drops like this, as it is almost always at the worst possible time. Hanging in there during market turbulence brings many rewards, and they are not just financial. Peace of mind is one of them.
The value of diversification is also very clearly demonstrated by recent events. It is hard to predict who the winners or losers will be from one year to the next, so spreading your investments globally, as we do, is crucial.
And Finally…
Did you know that some plants can ‘see’ and ‘hear’?
Mimosa pudica, also known as ‘The Sensitive Plant’, reacts to sound, and can distinguish between vibrations caused by wind, touch, or the sound of a predator chewing.
Other plants, like Arabidopsis, have been shown to boost chemical defences when they ‘hear’ the sound of caterpillars munching nearby.
If this blog has raised any questions why don't we have a quick chat?
Garry Hale MD & Certified Financial Planner
A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.
It would only require the investment of an hour or so of your time, and the coffee’s not bad either.
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May Market Commentary
Introduction
April was an explosive month as President Trump’s ‘liberation day’ on 2nd April caused major market turmoil.
The trade tariff war was more hostile than markets had predicted and most indices went tumbling as the news of the tariffs broke. Trump quickly rowed back on many of his ‘counter tariffs’, allowing many markets to recover lost ground quickly, but their remains an underlying lack of confidence in US markets in particular. An ongoing heightened trade war with China, and concerns around Trump’s unpredictability, continue to cast a shadow over financial markets.
With that in mind we’ve started this month’s round up with the US at the top of the running order.
United States
Using the S&P 500 alone, Trump’s first 100 days in office second time around has been the worst for the US stock market since Gerald Ford in 1974. The S&P 500 has lost over 7% since inauguration day. For balance, and as we have often said that markets are not political, he was in positive territory for the first 100 days of his first term. On the 3rd and 4th April, the S&P 500 and Nasdaq experienced their largest two-day percentage declines since the COVID-19 pandemic, with the Dow Jones shedding over 4,000 points.
Trump has dominated the 24-hour news cycle throughout April, so we won’t dwell on all the details, but it is worth adding some context that might help explain why he doubled back on his decision to impose the additional ‘counter tariffs’ and what he may have been trying to do by destabilising equity markets.
It’s easy to view stock market volatility as the reason why Trump quickly doubled back on his promise to keep country-specific trade tariffs in place.
For decades, US treasury bonds and the dollar have been seen as safe havens for investors in times of stock market volatility. In theory, there should have been a flight to US bonds when US equities tumbled on ‘liberation day’. Not only did that not happen, there was a mass sell off of US bonds. Yields rising, as they did sharply, means values are falling, a clear indication that confidence in US government issued bonds was severely dented by Trump’s tariff announcements.
There is $9.2trn of US government debt to refinance later this year. A mass purchase of US bonds would have reduced government borrowing costs, and initially it looked like this was working in Trump’s favour. This changed by Monday 7th April, and by Wednesday 9th April, thirty-year treasury yields hit 4.92%, their biggest three-day jump since 1982.
If bond yields had dropped, the Fed would be under more pressure to drop interest rates again. Trump has been publicly and unsuccessfully applying pressure on Fed chair, Jerome Powell, to do just that. Mortgage rates would drop and Trump’s refinance of government debt would look more comfortable. That may have been the plan, and if it was, it hasn’t worked. Investor sentiment is now low for a President who was elected on the strength of his financial competence. Fears of a recession have heightened and the news at the very end of April that the US economy contracted in Q1 will add to that fear.
In mid April, the International Monetary Fund (IMF) lowered its global growth forecast and revised down the US’ growth projection for 2025 from 2.7% to 1.8%, citing intensifying downside risks. It also raised the probability of a US recession to 40%. In its commentary, the IMF emphasised that policymakers around the world now face increasingly difficult trade-offs between fiscal sustainability, economic re-acceleration, and rising spending pressures.
Despite a brief market rally, when he announced the 90-day pause on additional tariffs, the persistence of the flat 10% tariff on all countries, the uncertainty around what will happen next, and the prospect of an escalated and protracted trade war with China does not bode well for US equity markets in particular. Financial markets demand predictability to thrive. He cannot be removed and does not need to face the electorate again, so it is difficult to know how he will respond as he tries to recover his reputation.
Whilst he may still be popular in the US, he is not elsewhere in the world. Politicians viewed as ‘anti-Trump’ are benefiting from this in the short term, as evidenced by the election of for UK Bank of England Governor Mark Carney as Prime Minister in Canada.
Trump’s usual style is to announce big changes and then row back from them, and ‘liberation day’ followed that pattern. There has been a drip feed of more positive news throughout late April as tariffs have been loosened in specific sectors such as technology and car manufacturing.
UK
During the turmoil of early April, the the Office for National Statistics (ONS) report that the UK economy expanded by 0.5% in February, with the services sector having a strong month, passed by with relatively little comment.
As the new, increased, minimum wage kicked in, along with increased National Insurance contributions for employers, job vacancies fell, suggesting that the UK labour market was weakening. However, the ONS warned caution on these results and confirmed that the UK unemployment rate remained at 4.4%, roughly the same as the previous three months.
Both UK equity and bond markets reacted negatively to the tariff announcement but had both settled down by the end of the month. The FTSE 100 was down on the month but remains in positive territory on the year to date – a reminder that steep market drops usually result in quick recoveries, and that sometimes its just better not to watch the news.
Both Prime Minister Keir Starmer and his Chancellor Rachel Reeves have had a tough start to their term since the 2024 election. Whilst nobody wants tough trading conditions, Trump was the clear cause of it in April and his domination of the news headlines may have taken some pressure off the government.
Starmer’s ratings have improved of late. He has survived the difficult balancing act of appeasing the Trump administration, resulting in the UK being set the minimum level of tariffs, whilst visibly supporting those less aligned to US policy, such as President Zelensky. There remains a longer-standing 25% US tariff on UK car imports which is the subject of some negotiation, with tax cuts to US tech firms one of the bargaining chips.
The current Bank of England Governor, Andrew Bailey, does not appear to be unduly concerned with April’s turbulence. He views tariffs as a hindrance to growth but does not believe we are close to a UK recession. Another cut to interest rates is expected on 8th May.
Europe
The Eurozone saw equity markets tank and recover in much the same way as the rest of the world at the start of April. The STOXX Europe 600 index fell by 2.6% on April 3 and an additional 3.1% on April 4, culminating in an 8.4% weekly loss – the worst in five years. The following week saw a further 6% drop, with a 4.54% decline on April 7. By the end of the month it was 2.2% down, and 3.34% up year to date.
Relations between Trump and Europe are much more fraught than with the UK, and the April 2nd tariffs were higher. Despite the retaliatory tariffs imposed by the Eurozone on the US, they benefitted from the US policy shift – a reversion to the flat 10% minimum tariff.Perhaps the Trump administration did not want a trade war with both China and Europe at the same time.
Contrary to typical patterns during trade disputes, the euro has been steadily appreciating by around 10% since early March. This surge further strained European exporters. Companies within the STOXX 600 derive about 60% of their revenues from abroad, with half of that from the U.S. The stronger euro compounded the challenges posed by tariffs, has caused earnings pressures for major firms like Unilever, SAP and L’Oréal.
It could cause a recession for Germany, the Eurozone’s biggest exporter. German spending has played a significant part in lifting the euro to a record high in April.
“If you have much weaker growth and a much stronger euro, that’s a bit of a double whammy for Europe,” said Emmanuel Cau, head of European equities strategy at Barclays.
Far East
The result of the 2nd April tariffs and subsequent climb down, or ‘pause’ depending on how you view it, is a clear head-to-head trade battle between the US and China.
China is projecting confidence, and whilst it has brought forward existing spending plans, it intends to hold back on throwing new money into the economy at this stage. Some commentators have taken this as China’s assumption that America will blink first in what could become a protracted trade war. They remain committed to their 5% growth plan, despite the significant headwinds they now face.
The potential impact is impossible to ignore as it has already rippled through China’s factories and export reliant industries. The manufacturing sector contracted in April, with the Purchasing Managers’ Index (PMI) falling to 49.0, the lowest in nearly two years. There have been job cuts as orders have dropped.
China may well believe it has a higher pain threshold than the US, and hope that inflated prices passed onto the public will force the US government’s hand, but cracks are starting to appear in the Chinese economy which will be hard to cover up the longer the trade war drags on. There has been an attempt to ease consumer pain. China has granted tariff exemptions on pharmaceuticals, semiconductors and aircraft engines, and is rumoured to have discreetly added other US goods which are exempted to the list and privately notified the relevant businesses concerned.
On 30th April, China enacted the Private Economy Promotion Law, aimed at boosting confidence in the private sector and strengthening its role in the economy. China’s private sector contributes over 60% of economic output and the law purports to ensure fair competition and promote growth, alongside other measures to promote the private sector.
In April 2025, core inflation in Japan surged to 3.4% year-on-year, its highest level in two years – primarily driven by rising food prices and reduced government energy subsidies. This surpasses market expectations and March’s 2.4% rate, signaling growing price pressures.
As expected, the Bank of Japan kept its policy rate unchanged at 0.5%, but it significantly reduced its GDP growth forecasts for 2025 and 2026 due to increasing uncertainties surrounding global trade. The central bank now expects GDP growth of just 0.5% in 2025, down from a previous forecast of 1.1%.
Emerging Markets
The diversity of economies grouped together under ’emerging markets’ makes sweeping statements tricky, as some are more linked to US economic policy than others, but on the whole a great deal of resilience was shown in emerging markets during April. The IMF adjusted its global growth forecast to 2.8% for 2025, with emerging markets expected to grow at a faster pace than developed economies. Inflation in many of those countries showed signs of moderation, providing central banks with room to adjust monetary policies to support growth.
Leading the pack were India and Brazil. India continued to attract investor interest due to robust economic growth and increasing integration into global supply chains. Brazil benefited from strong commodity exports and high real yields, making it appealing to yield-seeking investors.
One beneficiary of the trade wars could be South America, with 10 of the 12 states on the continent set the lowest level of 10% on 2nd April and the remaining two now also on 10%. China, as well as Mexico and Canada, will look elsewhere for it’s imports and Brazil in particular could be a beneficiary of this.
Conclusion
If US trade tariffs cast a shadow across global markets in March, they unleashed a downpour at the start of April. It would be wrong to pretend that all losses had been reversed by the end of the month and there is nothing to see here. US equities are a core component of most portfolios and there are bumpy times ahead for markets still to come. But many indices remain up for the year to date, and it is another clear example of how quickly markets bounce back from very steep declines.
The absolute worst strategy for any investor is to sell when the market drops like this, as it is almost always at the worst possible time. Hanging in there during market turbulence brings many rewards, and they are not just financial. Peace of mind is one of them.
The value of diversification is also very clearly demonstrated by recent events. It is hard to predict who the winners or losers will be from one year to the next, so spreading your investments globally, as we do, is crucial.
And Finally…
Did you know that some plants can ‘see’ and ‘hear’?
Mimosa pudica, also known as ‘The Sensitive Plant’, reacts to sound, and can distinguish between vibrations caused by wind, touch, or the sound of a predator chewing.
Other plants, like Arabidopsis, have been shown to boost chemical defences when they ‘hear’ the sound of caterpillars munching nearby.
If this blog has raised any questions why don't we have a quick chat?
MD & Certified Financial Planner
A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.
It would only require the investment of an hour or so of your time, and the coffee’s not bad either.