April general market comments

“Mr Big Stuff” – Jean Knight, 1971.

There’s no reference here to big Florida mansions, New York city skyscrapers or luxury golf courses, but rather to Mr Trump’s “big stuff” consisting in strutting onto the global stage with his signature swagger: tariffs policies, sparring with Jerome Powell, back and forth proposals for Ukraine… all these big stuff sent markets into a tailspin early in the month as investors grappled with uncertainties over trade wars and central bank independence.
As a consequence, the S&P 500 was, at some point during the month of April, down 16% from its February high, while the dollar literally tanked with the broad US dollar index hitting a 3 year low and Gold moving the opposite way.
But this type of market reaction, added to the US trading partners’ threats to retaliate, sounded like a “who do you think you are?” question to Mr Big Stuff, to paraphrase Jean Knight, leading Mr Trump to pivot and pause his reciprocal tariffs for 90 days while moving back threats to oust Powell. The ensuing market rebound was even more impressive than the fall experienced earlier in the month, with notably a 9.5% surge in a single day for the S&P 500, something that had not happened since the 2008 recovery.
“Tout ça pour ça!”, as the French saying goes: at the end of the month, the S&P 500 abandoned a modest 0.76% and the Nasdaq added 1.5%. On a broader scale, the MSCI World rose 0.74%, the Stoxx 600 Europe was down 1.2%, the MSCI Emerging Markets and the Topix respectively up 1.04% and 0.32%. Value fell 1.59% and Growth rose 3.12%. All these performance numbers must nevertheless be mitigated by the ample moves observed in currency markets, with the dollar down 5% versus the euro and 4.8% versus the Yen.
On the fixed income side, yields were relatively flat for the month in the US, but fell by almost 30 bps in Europe, a probable response to the euro rise and a more dovish stance from the ECB. Credit was under pressure because of increased expectations of a slowdown or a recession, the Itraxx Crossover fell 0.5% and is now slightly negative for the year.
Even if the worst effects of the tariffs threats seem behind, there are damages that could persist: confidence has been hit, supply chain chaos might be in the cards again, and the negative economic consequences of this mess already start to bite into corporate expansion and investment plans.

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