Markets Unwrapped: April 2025
The first week of April saw the largest sell-off for global equities since covid due to the US’ introduction of the largest global tariffs in history. The inflationary pressure expected from the tariffs in their current form reverberated suddenly through all asset classes and markets. Negotiations have begun from most countries regarding these tariffs and the remainder of the month saw global equities try to claw back what was lost in the first week, although still ended the month down.
Australian equities were not immune to the tariff sell-off, dropping 7.5% in the first week of April. With Australian equities already being down in March due to the RBA’s decision to cut interest rates, Australian equities were down to begin with and although it was a significant sell-off, had less space to fall. In the back half of the month, Australian equities rallied hard, ending the month on a positive and cementing the age old saying, ‘it’s about time in the market, not timing the market.’ and ended the month with a reasonable overall performance as Australia also came out of the tariff announcements relatively unscathed in comparison.
The Australian 10-year government bond yield decreased to 4.16% by the end of April, and with expectations recently shifting to the RBA possibly cutting the cash rate to 3% by the end of the year, we could see this drop further. Although investors sought out defensive asset classes to de-risk through the uncertainty, nowhere was safe in the first week of April. However, the large rotation to defensive assets, helped fixed interest through the month, although could continue to experience prolonged volatility through the uncertainty and weakening economy.
US recession fears were once again sparked as the decreasing cash rate, mixed with the significant inflationary pressures of the tariffs suggests a much weaker US economy in the near future. The same can be said for many parts of the developed world as economies were already in the midst of easing cash rates, and the new inflationary pressures will likely be felt coming up. Although the Chinese economy looks to still show signs of being weaker than the past 20 years, it continues to have the opposite issues of the developed world and is trying to stimulate the economy.
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