Blue Chip Portfolio USD Monthly Commentary – April 1st, 2025

Financial Market Review Summary

Tariffs – A Quick Take

Very rarely is a market commentary out of date so quickly and with so much conviction as we have just witnessed, but it does feel like 02 April 2025, known as ‘Liberation Day’, will go down in history as the day when the rules of sound economic policy went out of the window. It is too early to know all the consequences, but an increase in market volatility looks certain for the next weeks.

The newly announced US tariffs finally arrived on the back of President Trump declaring a national emergency over the trade deficit. Imposing reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA), if fully implemented, economists estimate these tariffs could reduce US GDP by 1–1.5% this year and raise core inflation by a similar amount.

Key points:

  • A minimum 10% tariff applies to all countries, increasing for those with trade surpluses with the
  • Notable tariffs include 20% on the EU, 10% on the UK, 24% on Japan, 46% on Vietnam, and a 34% reciprocal tariff on China (on top of a 20% increase earlier this year).
  • The average US import tariff could rise to 25–30%, levels last seen over a century
  • The formula used for setting tariffs is based on the size of each country’s trade surplus with the
  • Exemptions apply to Canada, Mexico, critical minerals, gold, pharma, semiconductors, lumber, and copper, though many are under separate investigations.
  • Steel, aluminium, and auto imports still face 25%

Impact on Multi-Asset Investing

While Trump left the door open for negotiations, the executive order also allows for further tariff escalation if trading partners retaliate. It is far too early to take any of these announcements as permanent, but we do think in the short to medium term the investment landscape will follow the trends that unfolded during March. There has been a weakening of the US equity market, especially for companies that depend on an international supply chain (for example Nike and Apple, which have large amounts of products manufactured in China). Europe on the other hand has accelerated, specifically since the announcement from Germany of a large increase in defence and other spending.

As the dust settles, we expect a wide dispersion of returns across the 11 US Equity sectors, providing a good entry point as our allocation model looks to identify the most promising blue chip stocks.

Across our range of multi-asset portfolios, we look to adjust our asset allocation models in line with the regime changes on the back of the ‘flight to quality’ outcome underway.

Overview of Q1

Q1 was a turbulent period for markets, with the S&P 500 suffering its largest quarterly drop since 2022 , mainly due to aggressive tariffs from President Trump and concerns over big tech valuations. The Magnificent 7 tech stocks ended the quarter in bear market territory. However, European equities outperformed, benefiting from a shift towards higher defence spending, marking the largest performance gap between the STOXX 600 and the S&P 500 in a decade. Gold prices surged as fears of a stagflation

 Key Macro Developments

  • Strong start, then turmoil: January began strong with robust US economic data, including a strong jobs report and high inflation indicators. However, concerns about rising interest rates and the impact of inflation caused a market
  • DeepSeek AI and tariffs: The release of DeepSeek’s AI model raised doubts about big tech valuations, leading to a sell-off in tech stocks. The imposition of tariffs by the US, including 25% tariffs on Canada, Mexico, and China, added to market
  • Inflation and stagflation fears: Inflation concerns escalated, with inflation expectations rising, and growing fears of stagflation. The S&P 500 dropped sharply in March, and consumer confidence fell to its lowest since
  • European fiscal shift: Europe saw a significant fiscal shift towards increased defence spending, particularly following the German elections. This boosted European assets, with German equities performing strongly, and the STOXX 600 outpacing the S&P 500 by a wide
  • USD Depreciation: During the month of March, Sterling appreciated 2.7% against the US Dollar, providing a difficult backdrop for any US assets held by GBP

Central Bank divergence:

  • US Fed: The Fed kept rates steady but signalled possible rate cuts in 2025 and slowed the pace of quantitative
  • ECB: The European Central Bank continued rate cuts.
  • BoJ: The Bank of Japan raised rates and signalled more hikes

 Asset Performance

  • Biggest Gains: Gold saw a dramatic rise (+19%), reaching an all-time US Treasuries also performed well, with the 10-year yield dropping by 36bps.
  • Biggest Losses: The S&P 500 dropped -4.3%, with tech stocks hit The US Dollar weakened by 3.9%, and cryptocurrencies saw significant losses, with Bitcoin falling -12.1%. 

Single Stock Rotation

Q1 was marked by geopolitical tensions, fiscal policy changes, inflation worries, and a shift in market sentiment, with European equities outperforming while US markets faced significant challenges. Gold and US Treasuries were beneficiaries of the risk-off environment, while US equities, the US Dollar, and cryptocurrencies

The rotation away from the Magnificent Seven stocks continued apace and also saw the allocation within the Blue Chip portfolio reduced. Likewise, as the signs of a slowdown in the US economy picked up pace, the Consumer Discretionary sector weakened. Consqently, we replaced our holdings in that sector and replaced them with a number of household names from the Healthcare sector, such as Eli Lilly, Astra Zeneca and The United Health

Group. We will monitor the reaction of the US equity market as the tariff story unfolds and will look to reposition the holdings as the new trends become apparent.