Monthly Commentary – May 02, 2025

Financial Market Review

April was one of the most volatile and dramatic months in financial markets in recent history. The catalyst was President Trump’s surprise announcement of sweeping reciprocal tariffs, with levies eventually ranging from 10% for many key trading partners, but as high as 145% for China.

Within hours, US equity futures tumbled, and over the following two days, the S&P 500 dropped over 10%, marking its 5th-worst two-day decline since World War II. Bond     markets were not spared; the 30-year US Treasury yield briefly surged above 5%, and the VIX index spiked above 50 – a level seen only during the Global Financial Crisis (2008) and the early Covid -19 panic (2020).

By the end of April a degree of calm had been restored, with the Vanilla Blue Chip Portfolio USD in positive territory, outperforming the S&P 500 Index by 1.45%, as was the Vanilla Global Balanced Portfolio USD, which returned 3.2%.

Policy Response and Market Reversals

Relief came mid-month when President Trump announced a 90-day suspension of tariffs for non-retaliating nations. This triggered a powerful +9.5% rally in the S&P 500, the best single-day gain since October 2008. Markets saw brief stabilization, with volatility retreating and bond yields cooling off. Nonetheless, headline risks persisted, including threats of further tariffs on China and new restrictions on chip exports.

Throughout the month, sentiment oscillated sharply. While some days mirrored 2008 or 2020 in terms of stress, the S&P 500 ended April down just -0.7%, which masked the dramatic intra-month swings. Remarkably, the index also logged both its best and worst daily returns since the pandemic.

Fixed Income & Currency Volatility

Fixed income markets witnessed extreme dislocations, with the 10-year UST – Bund spread widening the most since German reunification 35 years ago. US Treasury auctions   struggled amid concerns about foreign demand. Meanwhile, the US dollar posted a -4.6% drop, its worst month in over two decades, driven  by deteriorating investor sentiment and     a sharp re-rating of US policy risks, with many commentators suggesting it was the deterioration of the US Treasury markets that forced the President to step in to announce   the 90-day suspension of the tariffs.

The speed at which the level of volatility erupted in the markets displayed a lot in common with the initial period after the Covid crisis of 2020. On that occasion the market rebound was even stronger than the sell-off and those managers who had sold off their positions would have missed out on some spectacular ‘once in a generation’ returns. And so it was for many investors during April, although with the pronounced weakening of the USD, this has led to additional losses that have not yet reverted back to their pre-tariff levels.

Safe-Haven Surge: Gold and European Bonds

Amid heightened uncertainty, gold surged +5.3%, capping a +25.3% year-to-date performance, its strongest start since 2006. European sovereign bonds, especially German bunds, rallied significantly as investors rotated away from US Treasuries. Bunds returned +2.0%, the best since last November.

Despite fears of recession, US macro data remained relatively resilient. Weekly jobless claims held steady, and real final sales to private domestic purchasers grew +3.0% (annualized), suggesting underlying demand strength. April’s flash PMIs in the US (51.2) and Euro Area (50.1) remained marginally expansionary, easing concerns of an imminent global  slowdown.

As the market digested the risk of a protracted trade war, Brent crude fell -15.5%, marking its worst month since November 2021. The retreat in oil signalled markets’ reassessment of global growth prospects and rising odds of demand destruction from escalating trade frictions.

US Single Stock Performance Highlights

Winners:

  • Netflix +21.4%: Netflix posted very strong earnings for the first quarter of 2025, as revenue grew by 13%.
  • Broadcom +15.0%: The company’s stock experienced volatility, dropping over 10% following the tariff announcements but late rebounding as the administration signalled possible exemptions for certain countries.
  • Walmart +10.8%: Walmart’s CEO warned that the sweeping tariffs could disrupt supply chains and lead to empty shelves, especially given the company’s reliance on imports from China. The general view is that the company is leveraging its scale and diverse supplier base to mitigate price increases and maintain inventory levels.
  • Eli Lilly and Company +8.8%: While the pharmaceutical sector experienced initial jitters, Eli Lilly’s stock has remained relatively stable, supported by its commitment to US manufacturing invesments.

 Losers:

  • UnitedHealth Group Incorporated -21.4%: Shares dropped 27% over a two-day span in mid-April after the company cut its full-year earnings forecast by over 10%. This marked the third consecutive quarterly report that triggered a significant selloff in the stock.
  • The Walt Disney Company -7.9%: The Walt Disney Company (NYSE: DIS) experienced a significant market downturn in April 2025, driven by a sharp decline in consumer sentiment amid escalating trade tensions and tariff uncertainties. Disney’s diversified operations – including theme parks, cruise lines, streaming services, and film production – are particularly sensitive to shifts in discretionary spending.
  • T-Mobile US, -7.4%: President Trump’s imposition of a 145% tariff on Chinese imports has disrupted tech supply chains. Although smartphones are temporarily exempt, T-Mobile anticipates rising operational costs, leading to potential price hikes for consumers.

Asset Class Performance Highlights Winners:

  • Gold: With gold prices up 3% during the month, now means they’re up +25.3 since the start of the year.
  • European Sovereign Bonds: As sentiment towards Europe continues to build, this asset class delivered a 2% return during the month.
  • Japanese Yen: As with most currencies, the Yen appreciated against the USD by 8%, which adds to the growing strength seen in previous months.

Losers:

  • Oil: As investors priced in slower global growth and a significant trade slowdown, Brent crude oil prices dropped sharply (-15.5%).
  • Hang Seng Index: This key index for Asia was down 4% in local
  • S&P 500 Index: The US key benchmark was down by 7% (in USD) in April and has lost ground for the third consecutive month.