Inside the markets | Multi-Asset review

April was dominated by the so-called ‘Liberation Day’ which brought the announcement of wide-sweeping tariffs against a broad range of countries. While tariffs were expected the breadth or magnitude were arguably not.

Key events and developments

It is fair to say that the magnitude and style of the announcement was unprecedented and the immediate market reaction was of extreme aversion as the prospect of a trade war increased the likelihood of a global recession in investor’s minds. Sharp share price moves followed (in both directions), some of which were of a magnitude rarely seen outside of COVID and GFC like periods.

At one stage US equities, US bonds, and the US dollar were all down. Something rarely seen in a developed country and more akin to something seen in emerging economies in crisis. The US administration did seem to blink during the month, arguably encouraged to by the US Treasury market, or so-called ‘bond vigilantes’, as long-dated US Treasury yields spiked.

Market reactions and performance

Despite extremely volatile markets in April, equity market returns were only marginally negative in local currency terms. And divergence in those returns hasn’t been huge with regional returns in the ballpark of up or down a percent or so.

In Sterling terms, things were starker, with US dollar denominated assets and indices doing worse. An obvious example of that is US equities, but two other examples are emerging markets and global small cap equities where positive returns for US dollar investors became negative for Sterling investors. Outside of traditional markets, gold continued to rise due to its perceived safe haven status, and oil fell markedly on a perceived weakening of global demand.

Looking at 2025 to date, the divergence in returns across markets and within markets is more pronounced. Most of that divergence happened before the April volatility with the US equity market beginning to underperform due to earlier catalysts like the DeepSeek announcement, and a weakening in the earnings outlook.

Sterling investors in US and global small cap equities have had the extra headwind of a strengthening GBP meaning losses for US equities in the double digits. A reminder of how impactful currency moves can be on returns. In emerging markets and developed Asia, the difference in Sterling returns and US dollar-based returns was enough to mean the difference between positive and negative outcomes year-to-date. The only real bright spot was in Japanese equities, where Sterling returns were higher than Yen-based returns.

Fixed income markets are up for the year with the higher quality government and investment grade credit areas outperforming high yield in developed markets, although emerging market debt performed well. Gold has rallied significantly, up around 25%, while oil is down markedly.

Strategic positioning and advice

Looking forward, we expect volatility to persist, albeit it not at the extreme levels seen in April, given the degree of uncertainty investors are dealing with. We may look back to April as a watershed moment, where there was some permanent impairment of confidence in US assets and the catalyst for a more persistent rotation to non-US assets, particularly for investors outside the US. We have been speaking for some time about how the next few years are unlikely to be like the majority of the post global financial crisis landscape and we continue to believe that.

For us that means having the ability to be flexible because we feel that as much value will be derived from what happens within asset classes as from what happens between asset classes.