Market Outlook April 2025
Those hoping for prosperity under Trump have had an unpleasant shock. The so-called liberation day and reciprocal tariffs on about 90 countries were the triggers of a record market selloff.
In early April, President Donald Trump announced a series of sweeping tariffs aimed at addressing trade imbalances and promoting domestic economic growth. These measures include a universal 10% import tax on all goods entering the United States, with significantly higher tariffs imposed on specific countries: China with even 104%, European Union 20%, Vietnam and Japan with even higher tariffs on imports.
The administration justifies these tariffs as necessary to correct long-standing trade deficits and to protect American industries. President Trump referred to the tariffs as “medicine” needed to rectify economic imbalances. Treasury Secretary Scott Bessent emphasized that these are strategic, one-time adjustments aimed at fostering long-term economic benefits, despite acknowledging potential short-term market disruptions.
Wall Street analysts have a bleak outlook on the announced tariffs and their potential consequences. They see no positive aspects to these measures. A straightforward calculation suggests the tariffs would function as a significant tax increase, potentially the largest relative to the economy since 1969, generating close to $400 billion. This move is also predicted to significantly boost inflation, by 1 to 1.5 percentage points, pushing the average tariff rate to its highest level in a century, at 23%. Consequently, the reduction in consumer buying power could lead to negative growth in real disposable income during the second and third quarters. In essence, the prevailing opinion among strategists is that tariff announcement represents a set of policies likely to cause a recession in the US economy.
BENDURA Investment Policy
*inkl. UK und CH
Die Begriffe attraktiv / unattraktiv beschreiben das Renditepotenzial der verschiedenen Anlageklassen. Eine Anlageklasse gilt als attraktiv, wenn ihre erwartete Rendite über der lokalen Cash-Rate liegt. Sie gilt als unattraktiv, wenn die erwartete Rendite negativ ist. Sehr attraktiv / sehr unattraktiv bezeichnen die Einschätzungen des BENDURA Anlagekomitees mit der höchsten Überzeugung. Der Zeithorizont für diese Einschätzungen beträgt 3-6 Monate.
Global Economy
USA
Significant uncertainty surrounding US government policies is negatively impacting business confidence and investment plans, as seen in declining small business expansion intentions and planned capital expenditures. Consumer sentiment is also weakening, reflected in higher unemployment expectations and reduced spending plans, such as for vacations. Inflation expectations rose significantly in the past days, with the market participants now expecting 100 – 125 basis points cuts this year. Fed Chair Jerome Powell said the Fed should wait for more clarity before making any changes to the policy stance, and that it is too soon to say what will be the appropriate path for monetary policy. However, Fed will be facing political pressure to ease, even though inflation remains sticky. As of now, the US economy seemed to be resilient with adding more jobs than expected in March (Change in Nonfarm Payrolls – 228 thousand versus 114 thousand expected) and annualized GDP growing 2.4% in the last quarter.
Europe
March was positive for European markets with Germany suspending the ¨debt break¨ and unveiling plans to boost spending on the military and infrastructure. This marks what many see as the most significant shift in German economic policy since reunification. While many had anticipated that Germany would eventually need to increase spending, the magnitude of the current shift has taken everyone by surprise. Just a month ago, projections hovered around €200 billion, already a large figure. Now, the number has surged to €900 billion, nearing the symbolic $1 trillion mark. In effect, Germany has eliminated the fiscal restraint that has been holding back Europe since Mario Draghi’s famous “whatever it takes” pledge. For equity investors, these developments are a positive sign. Looking at the bigger picture, if Draghi’s recommendations and other growth-oriented policies are implemented, they could reignite domestic economic momentum in Germany and across Europe—something that’s been absent since the global financial crisis. Over time, this could push European growth above its long-term average and lead investors to shift more capital into the region, boosting asset valuations.
However, the current trade war implications with US distort the short-to-medium term picture. With US imposing 20% tariffs on European goods, Stoxx 600 index tumbled with the heaviest losses since the start of pandemic. The market is taking into consideration concerns that the trade war will have negative implications on economic growth and curb consumer demand.
Asia
Chinese stocks so far this year have been a big winner as the tide appears to be turning, driven by strong corporate profits, enthusiasm over artificial intelligence and an apparent easing of regulatory pressure from Beijing. This all has caused Chinese stocks to sharply outperform while at the same time stopped yields from going further south. However, US announced 104% tariffs on Chinese imported goods changed the picture with Chinese shares and corporate bonds plunging in fall-out of an emerging trade conflict between first and second largest economies in the world. Although China held ¨talk first¨ approach, an imminent answer to US tariffs led to 34% retaliatory tariffs on all US imported goods and implementing export bans on certain rare earth metals. It implies that still sluggish Chinese imports will fall further and might cause recession in the country.
Equities
In terms of performance for the month, U.S. stock indices recorded their weakest quarter in nearly three years, driven by concerns that new tariffs could usher in a period of stagflation in the world’s largest economy. Technology shares were particularly affected as enthusiasm around the AI rally began to fade. The Nasdaq index dropped 8% in March alone and is now down 19% year-to-date. Tariffs announced on April 2nd plunged all American indexes, dragging down tech-heavy Nasdaq index -10% in three days. S&P 500 index sinked below psychological 5000 points barrier, bringing the index to more than -14% YTD. One of the biggest losers were consumer-facing and economically sensitive stocks such as Nike (-26% YTD) or FedEx (-27% YTD).
The main indices in Germany, Spain and Italy lost between 1%-2% while France was especially hard hit with the CAC down 4% in March. However, European stocks had a standout quarter, with the Stoxx 600 outperforming the S&P 500 by nearly 17 percentage points in dollar terms—a record-breaking gap. Initially, investors were drawn to the relatively low valuations of European equities following years of lagging behind. Sentiment improved further after Germany announced new fiscal plans, boosting confidence in the region’s economic and earnings outlook. Defense stocks saw strong gains, playing a major role in the market’s rise, alongside solid performance from banks. Defense stocks played a main role in the rally, benefiting from rising geopolitical tensions and long-term structural trends. The main winners were Rheinmetall AG, Thales SA, BAE Systems PLC and Leonardo SpA, all profiting in high double digits in Q1 this year. Compared to US markets, it still does make sense to invest in European equities, even though ¨easy gains¨ may already be behind us. With the global overexposure to US assets and concerning trump’s policies, reducing US exposure at this point looks like a prudent risk management. At the same time, European markets seem to be fair valued with notable lower Price-to-Earnings, Book value and Price-to-Sales ratios.
Asian equities ended March also lower, with sharp declines in the final days wiping out earlier gains. The selloff was driven by growing fears over the economy from US tariffs. Before announcing the tariffs, Japanese trading houses and automakers were hit hard, while South Korean chip and battery makers, along Taiwan’s already struggling semiconductor sector, also saw steep losses. The selloff deepened in early April when tariffs were announced, with Chinese Hang Seng Index falling historical 13.2% in one day after incurring losses several days before. Japan’s Topix lost 6.8% the same day, while South Korea’s Kospi index- 5.6%. Trump’s latest charge for China would pile onto a 34% reciprocal duty set to kick in April 9th, was well as a 20% hike implemented earlier this year. That takes the cumulative tariff rate announced this year to 104% – effectively doubling the import price of any goods shipped from China to the US. The escalation in tensions makes any imminent call between the two world leaders less likely. Trump hasn’t spoken with Chinese President Xi Jinping since returning to the White House, the longest a US president has gone without talking to his Chinese counterpart past-inauguration in 20 years.
Bonds
The world may be approaching a major slowdown in growth unless trade tensions and tariffs ease significantly. In such situations, U.S. Treasuries would traditionally serve as a safe haven. However, that conventional logic is now being challenged. Both Treasuries and the U.S. Dollar are no longer seen as the universally “risk-free” assets they once were.
As global investors seek safety for the first time in years, U.S. government bonds are facing strong competition from alternatives. This year, 10-year Treasury yields have dropped by about 40 basis points, even briefly dipping below 4% following a wave of tariffs announced by President Trump—measures that many economists warn could tip the U.S. into recession.
In contrast, yields in other major economies have moved higher. Germany’s 10-year bund yield has risen to 2.61%, pricing in increased government borrowing to fund higher defense spending. Japanese 10-year yields, which hovered near zero for years, have now climbed to around 1.25% amid expectations of tighter monetary policy. While still lower than U.S. Treasury yields, these rates are becoming more appealing to European and Japanese investors—especially when accounting for currency hedging costs. As a result, investors may be more inclined to shift funds back to their domestic markets, where monetary policy paths appear more predictable.
Currently the market is pricing almost four rate cuts in the US. However, with a more cautious approach from the Fed Chair Jerome Powell, US central bank will not rush to react to administration tariffs or financial market turmoil.
Looking ahead, with ongoing volatility and uncertainty, the outlook remains cautious, favoring a neutral to slightly long duration positioning, and focusing on opportunities across countries and along the yield curve. For credit investors, the recent widening of spreads offers a more appealing entry point compared to earlier tight levels. In portfolio construction, fixed income continues to offer strong value through elevated yields, its defensive role during periods of stress, and its typically negative correlation with equities.
Commodities & Currencies
Oil prices have fallen significantly to a four-year low, with Crude oil now hovering around 60 USD per barrel. The price drop coincided with a chaos of tariffs and a surprise output increase by OPEC+. Other commodities also experienced significant drops as concerns about reduced demand for raw materials increased. Copper prices fell as much as 7,7%, reaching their lowest since January. Similarly, European natural gas futures saw a sharp decline, at one point falling by over 10%. The negative sentiment also affected major mining companies, with Glencore Plc, BHP Group and Rio Tinto also experiencing significant declines.
Concerning market and political uncertainty, gold prices have surged, reaching over 3000 USD per ounce, up from 2000 USD in just 15 months. Emerging market central banks are buying gold, regardless of price, creating consistent demand. Global political uncertainty and falling real interest rates could further drive gold prices higher. We maintain positive outlook on gold and see opportunities to increase the holdings when prices temporarily decline. Current market volatility affected gold’s price too, with gold falling from 3200 USD to 3000 USD per ounce again.
