Please see the below article from Brooks Macdonald, analysing the key factors currently affecting global investment markets. Received today – 15/04/2025
What has happened?
The relief rally continued. The S&P 500 climbed 0.79%, securing its first back-to-back gains since the 2 April tariff announcement. The decision over the weekend to exempt smartphones and electronics from tariffs fuelled investor optimism for further tariff reductions, creating a positive backdrop for stocks and signalling that market stress is starting to ease. Tech hardware leaders like Apple (+2.21%) and ASML (+2.20%) outperformed, while automakers also rallied after President Trump’s comments hinted at softer auto tariffs. Broad market strength saw 85% of S&P 500 stocks advance. Volatility continued to fall back too, with the VIX index coming down to its lowest since April 3. On the other side of the Atlantic, Europe’s STOXX 600 gained 2.7%, and UK’s FTSE 100 gained 2.1%.
Bond market breathes a sigh of relief
While stocks rallied, the bond market offered perhaps the biggest relief for investors. Last week, fears of financial turmoil spiked as the 10-year Treasury yield jumped 50 basis points (the largest weekly increase since 2001). But yesterday, those concerns began to fade as the yield fell from 4.49% to 4.37%. Additional reassurance came from the New York Fed’s latest Survey of Consumer Expectations, released for March. The survey showed that long-term inflation expectations remained stable, with the 5-year measure even dipping slightly to 2.9%. This contrasted sharply with the University of Michigan’s survey, which reported a surge in long-term inflation expectations to multi-decade highs. Fed Chair Jerome Powell has often emphasized the importance of keeping long-term inflation expectations “well anchored,” so the New York Fed’s data was a welcome signal for policymakers and markets alike. While the New York Fed’s 1-year inflation expectation rose to 3.6% (up 0.5%), it was far less alarming than the University of Michigan’s figures, which hit 5.0% in March and 6.7% in April.
What does Brooks Macdonald think?
The pullback in Treasury yields has provided a much-needed boost to market sentiment, especially after last week’s sharp rise dented the appeal of bonds as a safe haven asset. Treasury Secretary Scott Bessent has downplayed concerns about systemic risks, dismissing fears that foreign governments might offload US Treasuries en masse. Instead, he attributed recent bond market volatility to investors unwinding leveraged positions. Given the potential for ongoing yield fluctuations, we favour a relatively shorter duration stance in our fixed income portfolios, which helps limit exposure to these swings and provides a prudent strategy amid persistent tariff and market uncertainties.
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Alex Kitteringham
15th April 2025