April 2025 Review

Key Highlights

• Tariff imposition against most countries, but most punitive against those with whom the US has a large trade deficit, caused financial market dislocation in the first week of April
• A spike in US Treasury bond yields over a short timeframe reputedly caused the US President to instigate a 90 day pause in most of the tariffs introduced a week earlier. The following chart from TradingEconomics.com illustrates the volatility in the US ten year bond yield since last November’s US election and the magnitude of the spike in its yield at the start of April.

• The European Central Bank (ECB) cut its official interest rate by 0.25%
• Financial market volatility heightened on Trump suggesting he will fire US Federal Reserve Chair, Jerome Powell and remove that institution’s independence before saying he won’t and hence restoring some relative calm
• Markets rallied strongly from the lows of early April on the potential easing of tariffs notably with China, previously the focus of a tit-for-tat stand-off between the US and China. US Treasury Secretary, Scott Bessent, is seemingly the architect of the change of tack on tariffs and now the key for financial markets’ integrity. From a fall of 11.2% to the 4th of April, the S&P 500 US equity index recovered to close out April down only 0.8% in US Dollar terms
• However, consumer confidence in the US plummeted further on uncertainty as shown in the following chart of the University of Michigan Consumer Confidence Index (widely acknowledged as the leading confidence indicator)

Blinking Trump

One week after ‘Liberation Day’ which felt more like ‘Escalation Day’, US President Trump blinked and softened his stance on tariffs. Underlying power appears to have shifted to US Treasury Secretary, Scott Bessent. As an ex-hedge fund manager and a successful one, financial markets have been somewhat soothed by the increase in his prominence within the Trump administration.

Powell stands firm

Amid the chaos, came an attack on US central bank (Federal Reserve or ‘Fed’) Chair, Jerome Powell. While not unexpected, it did not help sentiment given the Fed Chair’s integrity and the independence of the Fed itself. Within a matter of days, Trump retracted and stated that he wouldn’t fire Powell – Bessent at work again?

Data Corruption

Surprisingly, markets continued to react to economic data announcements even though they have been heavily skewed by the prospects of tariffs. Notably, there was a surge in economic activity to acquire goods ahead of anticpated price increases from tariff impositions. Amazon’s threat to put the cost of tariffs on its goods was removed following a complaint by Trump to Amazon’s Jeff Bezos. Further afield, we seem never to be far from an event attributable to some form of hacking. From corporates such as M&S to the strange circumstances around the power outage across Spain and Portugal, hacking is a reminder of the need for all companies including Pier, to be acutely aware of the threat posed by breaches of cybersecurity.

Charts of the Month

Your Money

The above two charts show the strength of the Pound/Sterling against the US dollar and the collapse in the price of oil. Sterling’s appreciation, most recently in April but also since the end of January, means a negative impact on the price of any US assets that aren’t hedged. Typically US equities aren’t hedged so while they largely recovered from the lows of early April by the end of April, in Sterling terms their returns were negative. Consequently, the Pier holdings in US equity trackers, although reduced over the past year, were the laggards in April due to being largely unhedged rather than as a result of the underlying equity holdings’ performance.

The second chart illustrating the fall in oil prices will be good news for US and UK consumers alike. Good news too for lower inflation ahead of key US and UK central bank interest rate decisions in early May. Note: with Sterling strength and a much lower oil price (it’s priced in US Dollars), why aren’t fuel prices substantially lower at the pump in the UK? Write to your MP.

In April, Pier portfolios continued their move to reduce exposure to US equities in favour of global exposure and to move away from higher valuations on mega-sized companies in favour of a broader approach to more attractively priced businesses. In Plus portfolios, exposure was increased to genuinely differentiated active managers who seek to deliver above market outcomes mostly by being index-agnostic. One addition and related to earlier commentary about cybersecurity, was the inclusion of the First Trust Cybersecurity ETF (CIBR) which invests in companies that focus on the prevention of hacking and protection of data.

The positives in April were led by the best performing equity market – Japan where returns were assisted by the Japanese Yen’s currency appreciation.

UK bond market exposures benefited from lower yields/higher prices. One active absolute return fund introduced into the Plus range in January to dampen volatility, Fulcrum Diversified Core Absolute Return, was one of the leaders being up over 2% in April.

April felt like a wild ride in financial markets and 2025 to date has been too but it’s important to note that for the twelve months to end April 2025, all portfolios bar one have posted positive returns.