Covering April Market
April was a wild month for stocks in which major indexes experienced sharp falls on the back of high levels of economic uncertainty followed by a strong rebound in which they recovered the bulk of their losses. During the month, stock market volatility hit levels not seen since the coronavirus pandemic. The best-performing sector for the period was Technology. Energy — which is sensitive to oil prices — was the worst performer.
As in March, investors were heavily focused on US President Donald Trump’s tariff policies in April. On April 2 (aka "Liberation Day"), Trump held an event in which he announced a tariff strategy to correct what he characterised as unfair trading relationships with other countries. Going into this event, many investors were under the impression that the President would set a global universal tariff of 10%, and that this would eliminate a great deal of economic uncertainty. However, in a dramatic twist, Trump unveiled a two-tier tariff structure: a baseline 10% tariff applied universally to US imports from all countries with the exception of Canada and Mexico, and additional country-specific tariffs on approximately 60 individual nations.
This included very high tariffs on imports into the US from a range of markets including China (34%), Vietnam (46%), Taiwan (32%), and the European Union (20%). And it sent stocks into meltdown mode with the S&P 500 Index experiencing its worst four-day drop since the Global Financial Crisis of 2008/2009.
Now, Trump didn’t seem too phased by the stock market “carnage” (his first 100 days were the worst for the S&P 500 for a new president since Richard Nixon in the early 1970s). He also didn’t seem too concerned about the potential for an ugly global trade war (China announced tariffs on the US in retaliation that resulted in a tit-for-tat exchange between the two economic powerhouses in which the US raised its tariffs on China as high as 245% for some products). However, when the US bond market — which is significantly larger than the US stock market — started to show signs of stress as global investors offloaded US Treasuries (investors who sell a country’s bonds in response to fiscal policies they see as reckless are known as “bond vigilantes”), Trump quickly announced a 90-day tariff pause to iron out trade deals with other countries. This led to a sharp rebound in stocks — with Apple surging 15% (its best day since 1998), and the biggest one-day decrease in the VIX Index (aka the “fear index”) ever. The rebound was a good reminder of how hard it can be to time the market. Just hours before Trump’s announcement, Goldman Sachs had increased its odds of a US recession.
It’s worth pointing out that while equity markets have rebounded from their April lows, many economists still expect a recession in the near term.
Analysts at JP Morgan Research, for example, have raised their expectation of a 2025 recession to 60% — up from 40%. If a recession were to materialise, it could have a negative impact on a range of industries including retail, travel, automotive, manufacturing, and banking. Note that early in the month, several US regional banks raised their provisions for loan losses — particularly in commercial real estate — reigniting fears about the stability of smaller lenders. Of course, at this stage, a recession is not guaranteed. However, it is highly likely that tariffs will have a negative impact on global economic growth in the short term (many companies scrapped their full-year guidance in April). Given this outlook, many Wall Street strategists have lowered their year-end targets for major indexes, with Deutsche Bank cutting its year-end S&P 500 target from 7,000 to 6,150.
With recession risks up, investors have started to bet that the US Federal Reserve will lower interest rates sooner rather than later. Some believe that rate cuts could come as early as June if there is clear evidence of economic weakness. The fact that the Fed has kept rates relatively high (while the European Central Bank has made seven cuts over the last year) has disappointed some market participants, including Donald Trump, who talked about potentially removing Fed Chair Jerome Powell in April. This issue caused some volatility in the markets as countries that don’t have an independent central bank generally face a greater risk of politically motivated monetary policy decisions, which can lead to inflation, currency fluctuations, and a lack of investor confidence.
Late in the month, investors turned their attention to corporate earnings.
Netflix was one of the first companies up and delivered strong results with revenue rising 13% year-on-year. It’s worth noting that some investors are looking at this stock as relatively recession-proof given that the cost of a monthly Netflix subscription is far lower than many other entertainment options (and if consumers switch down to the ad-supported tier, Netflix actually makes more money). Another company that posted strong numbers was Google owner Alphabet. Despite competition from the likes of ChatGPT and Perplexity, its search business delivered solid growth (it also saw strong growth in cloud computing). Conversely, Tesla’s results weren’t good, with automotive revenue falling 20% year-on-year. However, the stock rallied after CEO Elon Musk said he would be spending less time with the Department of Government Efficiency (DOGE) and more time at Tesla in the future.
Meanwhile, in Europe, LVMH posted a 3% drop in quarterly sales as consumers reined in their spending on luxury goods. A few years ago, LVMH was Europe’s largest company but that title now belongs to software company SAP.
Turning to commodities
Gold — a safe-haven asset —– continued its bull market run, hitting an all-time high of $3,500 per ounce during the month before pulling back to around $3,300 per ounce. This strength boosted gold mining stocks, which tend to see higher levels of profitability when gold prices are elevated.As for oil, it weakened on the back of recession fears, ending the month at $59, the lowest level since April 2021. Lower oil prices are a key objective for Trump, as he believes that they will help US consumers.
Finally, crypto had a strong month with Bitcoin rising almost 15% to around $94,500. This positive performance is notable as in the recent past, Bitcoin has acted like a leveraged Nasdaq product (outperforming in equity bull markets and underperforming in bear markets). Some investors believe that Bitcoin’s recent decoupling from “risk-on” assets is not a fleeting anomaly, but the beginning of a significant shift. As trade wars press on, Bitcoin’s unique value proposition as a scarce, decentralised, and globally accessible asset appears to be resonating with investors. Late in the month, the UK announced plans for a comprehensive regulatory regime for cryptoassets. Speaking at a FinTech event, Chancellor Rachel Reeves said that the UK plans to deepen regulatory cooperation with the US to boost responsible adoption of cryptoassets.
Note that while April ended on a cautiously optimistic note, markets remain on shaky ground. Despite rebounding from their April lows, major stock market indexes such as the S&P 500 and the Nasdaq remain below their 200-day moving averages, meaning that the bearish trend is still technically in play and further volatility or downward pressure could materialise if economic data deteriorates or geopolitical issues impact investor sentiment negatively.
With trade tensions unresolved, central bank policy in flux, and recession risks rising, there is still a lot of uncertainty. In times like these, patience and diversification matter more than ever.
