By Jan Faure
Global markets experienced significant volatility in April due to the impact of US trade policy. The month began with President Trump unveiling a set of tariffs that were broader and more punitive than anticipated. This triggered a sharp sell-off in equity markets and pushed the VIX, a key measure of implied market volatility, to its highest level since the pandemic. However, markets rebounded much of their losses into month-end after Trump signalled a more conciliatory stance, introducing a 90-day pause on tariffs to allow for negotiations..
In the US, the S&P 500 declined by 0.8% for the month while the tech-heavy Nasdaq Composite gained 0.9%. At one point, the S&P 500 had registered a drop of almost 20% from its February high. US companies began reporting first-quarter 2025 earnings in April and have to date exceeded analyst earnings expectations. However, ongoing uncertainty over tariffs has led many companies to either withdraw guidance or maintain previous forecasts.
In Europe, the Euro Stoxx 50 declined 1.7% for the month while the UK’s FTSE 100 dropped 1%. Trump’s tariffs weighed heavily on Chinese equities, as China faces tariffs of 145% on all exports to the US. China’s CSI 300 declined 3% while Hong Kong’s Hang Seng fell 4.3%. Japan’s benchmark Nikkei 225 recovered some of its March losses, closing April 1.2% higher, despite continued worries about the negative effects of US tariffs on the country’s economy.
The shockwaves triggered by the 2nd April “Liberation Day” tariff announcements also heavily affected global bond markets. US Treasury yields initially surged amid fears of tariff-driven inflation and a potential decoupling from the US economy. However, yields later stabilized after President Trump adopted a more moderate stance. Meanwhile, declining yields on Eurozone and Japanese government bonds, along with a strengthening of the euro and yen, helped drive a 2.9% gain in global aggregate bonds.
Gold was the big beneficiary of April’s uncertainty, reaching a new all-time high of $3,500. Gold remains a core hedge amid trade, policy, and macro uncertainty. At the opposite end, oil prices were among the hardest hit, with Brent crude falling over 15% for the month. The decline was driven by a surprising decision from OPEC+ to boost supply, an announcement that coincided with growing investor concerns about weakening demand amid signs of an economic slowdown.
In the US, minutes from the Federal Reserve’s March meeting revealed that policymakers anticipate higher tariffs will push inflation higher this year, although there is still uncertainty about the magnitude and duration. Fed Chair Jerome Powell cautioned that the escalating trade dispute could have a more pronounced economic impact than initially thought, citing the risk of higher inflation and slower growth. The Fed may find itself being pulled in opposite directions: should it cut interest rates to support a slowing US economy, or hold firm to fight tariff-driven inflation?
US real GDP contracted at an annualised rate of 0.3% in the first quarter, the first decline since 2022, driven by a sharp increase in imports and a drop in government spending. Imports surged by 41.3% as businesses and consumers rushed to stock up on goods ahead of impending tariffs. Despite the negative print, underlying economic activity appeared relatively stable. However, most analysts anticipate a slowdown in consumer spending and business investment in the coming months, as rising prices and ongoing policy uncertainty begin to take a toll.
It seems the only certainty is uncertainty. Trump’s trade war and unpredictable policy shifts have sparked fears of a US recession, as slowing growth, weak consumer confidence, and persistent inflation combined to create a potentially toxic mix for financial markets. As a result, institutional investors have largely remained cautious while retail investors, on the other hand, have tended to buy the dip.
The uncertainty around the future direction of US trade policy remains elevated, likely contributing to ongoing market volatility. April’s lows created a buying opportunity that markets took advantage of. During this period, we have also seen the benefit of regional diversification as well as alternative investments helping mitigate some of the risks stemming from US policy.
Table 1: Global Indicators – Local reporting currencies
