The ‘Sturm und Drang’ (translated as ‘storm and stress’) of the tariff regime instituted by US President Trump remained the main feature for world markets in April 2025, with the overly aggressive and wide-ranging tariff increases announced on 2 April causing a sharp sell-off in risk-assets worldwide. Markets focused on the negative implications for both US and global economic growth. President Trump backtracked on his announcement on 9 April, however, postponing the tariff increases by 90 days which caused a strong rebound in most markets, other than in China, with risk-aversion subsiding.

US markets had a mixed month due to the tariff announcements, with the Nasdaq being the star performer, up marginally by 0.9%, the S&P 500 ending April lower by 0.8%, and the Dow Jones bearing the brunt of the weakness, ending the month lower by 3.2%. US GDP growth is forecast at 2.0% for 2025, underpinned by consumer resilience and capex, but activity data is softening with PMl’s and retail sales declining, signalling a pivot to a stagflation-lite macro regime. Inflation remains sticky, weighing on business and consumer sentiment. Investment intentions are declining. The Fed continues to hold rates steady while fiscal stimulus is fading. The combined policy stance remains tight, limiting upside for rate sensitive sectors.

The S&P 500 traded at 21.5x forward earnings, vs. 30-year average of 16.9x. This valuation premium looks increasingly vulnerable with earnings expectations expected to soften. US equities traded at a premium to Europe (14.2x) and EM (12.2x). 2025 EPS growth is still projected at ~9-10% YoY, led by tech, financials, and industrials. Revision breadth has narrowed, however, to just 30%, and 53% of earnings pre-announcements have been negative, the highest since early 2023, indicating weakening forward guidance. Global asset allocators continue to rotate out of US equity exposure. Value, momentum, and minimum volatility factors are outperforming, while quality and small caps have underperformed the S&P 500 index. The US stock market has continued to underperform global equities year-to-date 2025. Japan, Europe, and Emerging Markets (EM) are benefiting from net earnings upgrades versus the US downgrades.

Equity markets in Europe ended the month mixed as the Dax rose by 1.5% as Germany’s fiscal spending in opposition to Trumps tariffs buoyed the market. In contrast, the Cac ended the month lower by 2.5%. Inflation in the Eurozone is expected to fall to 2.1% in 2025, versus 2.4% a year ago, close to the ECB’s target.

Real GDP growth for the Eurozone is forecast at 1.1%-1.2% for 2025. The core (Germany and France) continues to underperform due to weak manufacturing activity and subdued external demand, while peripheral regions such as Spain and Italy show resilience driven by infrastructure and services. Policy tailwinds remain persistent. Net earnings revisions have turned positive in Europe, led by Germany, Spain, and Sweden. 2025 EPS growth estimates have been revised to +8.0% for Europe vs 0.4% in 2024, driven by Aerospace, Chemicals and Industrials.

The UK market also ended weaker in April with the FTSE closing lower by 1.0% as UK inflation for March eased for the second month to 2.6% from the February print of 2.8%. Core inflation slowed marginally in March, printing at 3.4% vs the February reading of 3.5%. With continued concerns about high public debt limiting fiscal manoeuvring, similar to their US counterparts, UK policy makers also have a tough act balancing increased growth while tackling inflation and structural headwinds.

The UK remains an earnings laggard amid local demand weakness and inflation, while Eurozone equities trade at 14.2x forward P/E (20-year average is 12.8x) and at a ~33% discount to US equites, among the cheapest globally. This is the first time since early 2023 that all timeframes (short, medium, long) showed positive technicals, with Eurozone equities now outperforming all major regions, though stretched in the short term. Institutional exposure remains below the long run average, but is rising.

In Japan, the Nikkei ended the month lower by 4.1%, as concerns around the impact of the Trump tariffs  on the Japanese economy. Japanese core inflation for February printed at 3.0%, lower than the January print of 3.2%, surpassing market expectations, but reinforcing concerns about persistent price pressures.

Japanese real GDP growth for 2025 is projected at 1.0-1.2%, driven by resilient domestic demand, capex recovery and a competitive yen. Japan remains a rare Developed Market (DM) beneficiary of global disinflation and easing financial conditions. EPS growth has been revised down to 5.5% (from 8%), with autos/machinery guidance weakening. Japan is becoming a domestic growth play as Spring wage settlements suggest +4% base wage gains, the strongest in decades, pointing to durable rotation toward domestic consumption. We have witnessed strength in durables, housing and services, aided by household balance sheet health (low debt, high savings).

Japan trades at a forward P/E of 14.6x, significantly below US and global markets, with attractive dividend yields and share buybacks supporting valuations. Medium- and long-term signals remain constructive with short-term price action positive due to the April uptick in equity prices. Net flows are rotating from global beta (tech and exporters) to domestic reflation plays with shareholder returns rising steadily (dividends and buybacks giving a >3.5% yield), Japanese equities remain under owned by foreign allocators.

Asian markets were not immune to the tariff fallout with China being hardest hit with broad-based tariffs of 145% on all US bound goods and being excluded from the 90 days pause on tariff implementation. The Hang Seng fell by 4.3%, with the Shanghai Composite lower by 1.7%.

Chinese growth is forecast to slow in both 2025 and 2026 to 4.0%, reflecting the impact of trade tariffs, as well as trade policy uncertainty and deflationary pressures, and weak domestic demand. While the broader emerging market real GDP growth has been revised up to ~4.0% in 2025, driven by an expectation that developed markets will continue with policy easing, bottoming of global trade volumes, and strong domestic demand in Asia and select EMs (India, Indonesia and Mexico). Internal demand is supporting India and ASEAN, with foreign direct investment backed capex cycles and consumer resilience, while supply chain relocation trends also remain supportive.

EM equities trade at a forward P/E of 12x - well below DM peers (Europe: 14.2x, US: 21.5x), highlighting a compelling valuation cushion despite short-term risks surrounding policy flow through, USD trajectory and China stabilisation. Regional disparities remain acute. EM and Asia show weak short-term technicals, but both are now registering buy signals across medium term signals, and early evidence of bottoming. Fund flows have remained constructive as Asia EM ETFs posted ~$8.8bn in net YTD inflows, concentrated in India, Korea, and Indonesia. LATAM flows remain muted.

South Africa

The local market saw a recovery in most sectors notwithstanding continued concerns over the possible unraveling of the GNU and global trade tensions weighing on the bourse. Global trade disruptions continue to threaten exports by dampening demand from South Africa’s key trading partners, including China and the EU.

The JSE ALSI ended April higher by 3.3%, with more broad-based gains than in March. Property was the outstanding sector for the month, rising 6.1%, followed by industrials, which were up 4.9% over the period. The resources sector was stronger by 2.3%, largely driven by gold, with financials ending firmer at 2.2% for the month.

Selected top performing shares for the month were Anglogold, up 13%, Woolworths up 12.9%, Capitec up 10.9%, Redefine up 10.5%, Attacq up 9.5%, KAP also up 9.5%, and Naspers up 8.3%. Underperformers for the period were Aspen, down 25.6% (33% lower at one point on the back of an announcement that a contract dispute could cut core earnings for FY25 by almost half or close to R2bn). Further downside was experienced by Sasol, down 16.1%, Impala, down 12%, and Glencore down by 11.6%.