team reviewing financial data

Monthly Market Review April 2025

May 7, 2025

The financial markets experienced significant turbulence in April, largely driven by changes in US trade policy. Early in the month, President Trump announced a series of tariffs that were broader and more severe than anticipated. This announcement led to a sharp sell-off in equity markets and caused the VIX, a measure of market volatility, to spike to 60, the highest level since the pandemic. Trump later announced a 90-day pause on the implementation for countries that had not yet adopted retaliatory measures. He also removed tariffs on various electronic products. US-China trade tensions eased slightly later in the month as well, as the US administration softened its tone. This backpedalling helped stocks recover a good portion of their initial losses.

Developed market equities, tracked by the MSCI World index, rose by 0.9% over the month. Growth stocks outperformed value stocks, with the energy sector’s poor performance notably dragging down the MSCI World Value index. Emerging markets showed resilience, supported by strong returns from Mexico and Brazil. 

The bond markets were also impacted. The yield on 10-year US Treasuries peaked at 4.6% on April 11 before settling at 4.2% by the end of the month. A decline in euro government bond yields contributed positively to the Bloomberg Global Aggregate Bond index. A stronger Yen and Euro against the US dollar helped lift global bonds into positive territory, in US dollar terms. 

Gold emerged as a significant beneficiary of the market uncertainty, reaching a new all-time high of $3,500 on April 22. The Bloomberg Commodity Index as a whole, however, shed some of it’s year-to-date gains as other metals weakened and oil prices fell by 16%, due to rising recession fears and OPEC’s decision to boost supply. 

the font of an old well established bank

Fixed Income

Throughout April, the US bond market experienced notable volatility. There was a sharp increase in treasury yields from President Trump’s aggressive tariff policies and his public criticisms of Federal Reserve Chair Jerome Powell. Regulatory changes that were implemented after the 2007-2009 Global Financial Crisis made it more expensive for banks to hold bonds during periods of high volatility. They became relevant this month, adding to selling pressure, as institutional, along with individual Investors, withdrew heavily from US bonds.

Data was released during the month showing US March headline and core inflation rates fell below expectations, registering at 2.4% and 2.8% year-over-year, respectively. Despite an expectation of inflation re-accelerating over the next few months, markets are pricing in four rate cuts by the Federal Reserve by the end of the year. This expectation is driven by the belief that the Fed will need to act to mitigate the economic damage seen from tariff policies.

In Canada, the overall fixed income universe, represented by the ICE Canada bond universe, ended April with a moderate loss of 0.8%. The long end of the curve took the bigger hit due to inflation concerns and expectations that bond issuance will increase. 

The European Central Bank (ECB) reduced its key interest rates by .25% in April, bringing the deposit rate down to 2.25%. The rate cut provided support for the European government bond markets, as investors gained confidence in the prospect of lower interest rates. UK government bond yields were volatile throughout April and ultimately ended the month lower. Data release of a decline in March inflation and weaker economic activity set the tone for the Bank of England to cut rates in May. 

Credit spreads fluctuated significantly in April, initially widening sharply due to tariff announcements before retracing. Investment Grade credit markets demonstrated relative resilience, likely due to significant improvements in overall corporate debt levels during the last few years. 

financial analyst reviewing monthly numbers

Equity and the Economy 

Economic data released in April pointed to a moderation of economic growth in the US. The flash composite PMI data for March, which was released on April 1st, fell to 51.2, from a level of 53.5 last month. This serves as a gauge on the health and direction of a country’s manufacturing or service sectors. A level of 50 or higher represents an economic expansion, in which we are right on the cusp. The composite value decline was due to a decline in the services sector, which registered at 51.4. Conversely, the manufacturing sector, which came in at 50.7, saw an increase from last month. 

Business conditions sentiment, measured by the Michigan consumer sentiment index, dropped to levels reminiscent of the pandemic, indicating a negative shock in confidence. This is hindering investment and spending decisions, leading to a heightened risk of recession. 

The S&P 500 index underperformed global peers over the month, closing at -0.7%. The energy and healthcare sectors were the most notable laggards. Despite recovery later in the month, the index’s performance reflected broader concerns about economic growth and corporate earnings. 

For Canada, the TSX composite ended the month flat at -0.1%. The more defensive sectors of Consumer staples and Utilities were the top performers, with a return of 5.6% and 2.6% respectively. Liberation Day spared Canada of additional tariffs, but the initial one placed will continue to be a headwind for the Canadian Economy. This was shown in economic releases this month. The Conference Board’s consumer confidence index showed a fall to a record low in March, worse than in the US. As well as the Labour Force Survey showed employment dropping the most since January 2022. While Canada is also seeing signs of increased inflation from tariffs, consensus is holding that rates will be lowered over the course of 2025, as the negative economic impacts of the trade war could be higher than the inflation bump. The Liberal party, headed by Prime Minister Mark Carney, won the federal election at the end of April with a fiscal stimulus platform. Government spending ahead could help mitigate the negative economic effects. 

In the Eurozone, the flash composite PMI fell to 50.1 in April, driven by a decline in the services index to 49.7. The manufacturing PMI remained relatively unchanged at 48.7, supported by lower energy prices and expectations for fiscal stimulus. However, consumer confidence dropped to it’s lowest since December, showing that the ongoing trade tensions and the Ukraine conflict were weighting down economic sentiment. 

The European Union decided to suspend retaliatory tariffs on steel and aluminium for 90 days to create conditions for negotiations with the US administration. This decision, coupled with political agreement in Germany to form a new government, provided partial relief, but European equities still fell by 0.4% over the month. 

April’s flash PMIs in the UK also showed a deterioration in economic momentum, with the composite index moving into contractionary territory at 48.2. Trade uncertainty and higher domestic taxes contributed to this decline. The UK equity market fell by 0.2% over the month. The broader economic outlook for the UK remains challenging, with ongoing trade disruptions and market uncertainties expected to weigh on growth.

Japan’s all-industry flash PMI rose to 51.1 in April, thanks to a partial rebound in the services sector. However, the manufacturing index remained in contractionary territory at 48.7, confirming risks related to the expected negative impact of US tariffs on export-oriented Japanese companies. Despite these challenges, Japanese stocks outperformed, delivering a positive return of 0.3%. The outperformance was attributed to strong corporate earnings with successful strategic adjustments by companies to mitigate tariff impacts.

The month of April saw US tariffs on Chinese goods soar to 145%, with China retaliating in kind. Later in the month, the US administration’s willingness to negotiate helped ease tensions, which, combined with a solid first-quarter GDP print of 5.4% year-over-year, drove a rebound in Chinese stocks. 

Despite the rapid escalation in US-China tensions, emerging markets showed resilience compared to developed markets. Countries such as Mexico and Brazil were relative outperformers, benefiting from the relatively less punitive tariff approach taken towards them by the US administration.

In April, financial markets were marked by significant volatility driven by evolving US trade policies and global economic uncertainty. The persistent unpredictability of US tariffs underscored the importance of regional diversification in equity portfolios to mitigate risks. Despite fluctuations, high-quality fixed income investments will serve as a reliable hedge against recession fears over the next year. Inflationary pressures continued to loom, highlighting the critical role of alternative investments and commodities to safeguard against rising prices. As we navigate these turbulent times, a balanced and diversified investment strategy, along with knowledgeable active management, is essential to properly navigate the headwinds.

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Luke Demjen, CFA

Luke Demjen, CFA

I obtained my Economics Degree from the University of Calgary and have over 10 years of experience as an investment and lending advisor with one of the Big 5 banks in Canada. In 2018, I obtained the Chartered Financial Analyst (CFA®) designation, the premiere investment analysis distinction in the financial services industry. My academic knowledge, along with my experience and insights into the banking system and capital markets help make sure I put my clients savings to work and have them financially prepared to meet all of life’s goals and milestones. I am passionate about making sure my clients receive the industry’s best in financial advice and attention. In my spare time I enjoy performing martial arts as well as skiing, making music, and soaking up new experiences with friends and family.