– US trade policy drove volatility across markets
– Equities retreated, as growth concerns mounted
– USD weakness detracted from equity market returns for EUR investors
April 2025 was a month marked by significant volatility and uncertainty across global financial markets. The primary driver of this turbulence was the announcement of sweeping tariffs by the US administration, which had far-reaching implications for trade, economic growth, and investor sentiment.
Global equity markets experienced substantial swings throughout April. The initial tariff announcements on April 2nd triggered a global sell-off, with US stocks plunging by over 10% at one point and a surge in the VIX volatility index. However, markets calmed later in the month after some US policy moderation and better-than-feared corporate earnings results. The S&P 500 ultimately closed down around 5.5% in EUR terms, while the tech-heavy NASDAQ outperformed despite starting the month weakly, falling by 4.1%. Ex-US developed markets outperformed as capital flowed towards the UK, Europe, and Japan, continuing the trend of the previous three months. China, seen as the nation worst affected by US policy, was the weakest in EUR terms.
Gold performed exceptionally well in April, rising by more than 5.3% in EUR (black line above). Gold’s role as a safe-haven asset was reinforced by broader economic uncertainties and geopolitical tensions, with investors continuing to turn to the precious metal as a hedge against potential market downturns and inflationary pressures.
Currency markets were also strongly impacted by the tariff announcements, with movements here being a key component of equity returns when translated back into EUR. The US dollar, which would usually be expected to appreciate in an uncertain macroeconomic environment, sold off heavily vs all major currencies. In contrast, the euro exhibited strength through the period, gaining against most major currencies. Versus USD, the euro added 4.7%.
Within bond markets, global government bonds rallied through early April as uncertainty in equities picked up. A concerted sell-off then followed as investors priced in additional inflation concerns linked to the impact of US tariff policies. Some recovery was seen later in the month as policy moderated, but per the chart below, slowing growth expectations and greater levels of economic uncertainty led investment grade and high yield corporate debt to underperform government bonds over the month. US asset fared especially poorly, underperforming European and UK counterparts.
Despite signs of growth weakening in the US, the Federal Reserve has been clear that they won’t cut interest rates until the weakness is apparent in macroeconomic data due to inflation risks. This means less positivity at the margin for US bonds.
As mentioned above, one of the key themes in April was the impact of US tariff measures on the global economy. Observed levels of US trade policy uncertainty were extremely high as the chart below shows, and this uncertainty is expected to persist into the third quarter of 2025, adding to concerns about a potential growth slowdown, especially as the full shock from tariffs hasn’t fully hit macroeconomic and earnings data yet.
Economic indicators such as GDP growth and inflation trends have shown mixed signals. In the US, GDP growth peaked in December 2024 and has since declined to nearly 0%, a deterioration that underscores the challenges faced by the US economy in maintaining growth momentum amidst external pressures. The impact of initial US tariffs on economic forecasts for other regions has also been notable. While the US GDP forecast has deteriorated significantly, the EU and Japan’s forecasts have remained relatively stable. This divergence highlights the varying degrees of resilience among major economies in the face of trade disruptions, as well as differing monetary and fiscal policy responses.
While financial markets continue to present a complex and dynamic environment, the key to navigating such an backdrop lies in diversification across geographies, asset classes, sectors, and investment styles. By maintaining a balanced approach, focusing on quality, and remaining tactically flexible, investors can position portfolios to weather potential volatility while capturing opportunities as they emerge.
At Fairstone, we specialise in providing tailored investment planning advice to help clients achieve their financial goals. Our experienced advisors offer personalised strategies designed to optimise growth, manage risks, and ensure diversification across a wide range of assets. By working with Fairstone, you can have confidence that your investment decisions are guided by expertise, adaptability, and a commitment to your long-term success.
Contact us today to schedule a no-obligation investment consultation and start planning for a secure financial future.
This publication was prepared by Oliver Stone, Head of Portfolio Management & Imogen Hambly CFA, Portfolio Manager for Fairstone Private Wealth Ltd (United Kingdom).Fairstone Private Wealth Ltd. is authorised and regulated by the Financial Conduct Authority (FRN: 457558).
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Information as of the date of publication 16/05/2025
