Developed market (DM) equities posted a modest gain in April (MSCI World index +0.9% MoM). The month was marked by significant volatility, primarily driven by geopolitical events, particularly US tariffs. On 2 April, dubbed “Liberation Day” by US President Donald Trump, a baseline 10% tariff was imposed on all US imports, with additional country-specific tariffs, some as high as 49% (Cambodia). This announcement led to a 10% drop in DM equities in the days following, but the market rebounded by month-end after Trump announced a 90-day pause on tariffs to allow for negotiations. Amidst the geopolitical uncertainty, US corporates reported strong 1Q25 earnings, with approximately 70% of S&P 500 companies reporting during April. Earnings were up 15% YoY in aggregate, about 9% ahead of analyst expectations, marking the biggest earnings beat in three years. However, due to the uncertainty surrounding tariffs, many companies either removed or maintained prior guidance.
Netflix (+21% MoM) was one of the most notable positive contributors to equity market returns, reporting double-digit revenue growth in 1Q25 with margins and earnings well ahead of expectations. The company reiterated its FY25 guidance for low-teen revenue growth while maintaining profit margins. One of the most disappointing results came from Starbucks (-18% MoM), with earnings falling short of expectations. This marked the fifth consecutive quarter of YoY earnings declines, as the company’s turnaround strategy has yet to show signs of improving operating momentum.
Emerging markets (EMs) also ended April in positive territory (MSCI EM +1.3% MoM), partially boosted by a weaker US dollar. The US Dollar Index had its worst month since 2022 (-4.6% MoM), falling against most major currencies. While Chinese stocks struggled due to their exclusion from the 90-day tariff pause, strong performances from stocks in India, Mexico, South Korea, and Taiwan more than offset the drag from Chinese equities.
Interest rate markets experienced significant volatility in April. The initial response to the Liberation Day announcements saw the US government’s 10-year borrowing rate drop below 4% p.a. as investors priced in a higher probability of a US recession, increasing the likelihood of the US Federal Reserve (Fed) needing to cut interest rates to support economic activity. However, the borrowing rate soon climbed back towards 4.5% p.a., with market commentators speculating that foreign holders of US government bonds were selling these securities in response to US tariffs. The volatility was further exacerbated by Trump’s comments about seeking ways to circumvent restrictions on political intervention in the operations of the Fed to remove Chairman Jerome Powell. Ultimately, Trump walked back those threats, and the 10-year borrowing rate ended the month roughly where it started, at 4.2% p.a.
One of the biggest casualties in April was the oil price (Brent crude -15% MoM). This was mainly due to the unexpected agreement among OPEC+ producers to increase supply, a move that came just as investors were becoming concerned about an economic slowdown weighing on demand..
