April 29 marked President Trump’s first 100 days in office. His early-April Liberation Announcement signalled a major shift in US trade policy. A subsequent 90-day pause offered brief relief, but ongoing uncertainty continues to weigh on markets.
In equity markets, we saw volatility spike with the VIX reaching a level not seen since the onset of the COVID-19 pandemic, as investors looked to appraise what US trade policy means for the outlook on global growth and inflation.
Against this backdrop, the S&P 500 continued to struggle and finished the month down 4.5% (in sterling terms). However, investors were once again rewarded for being diversified, as European equities were up 1.4%, which meant our positions in the Vanguard Developed Europe ex-UK and iShares EDGE MSCI European Value funds were additive to performance. Our allocation to UK Mid-Caps, which are more domestically focused and less sensitive to the impact of US tariffs, also supported performance, as the Vanguard FTSE 250 fund was up 2.5% last month.
Returns from Government Bonds were mixed, as volatility was not just confined to equity markets alone. Following the Liberation Day announcement, the US 10-year yield saw its largest weekly rise since 2001, climbing to 4.6% before retracing to 4.2% by month-end. UK inflation linked bonds, which we continue to hold, fared better as the likelihood of another rate cut by the Bank of England increased following the fall in March’s inflation print and the continued softening of the UK economy.
In our Alternatives allocation, our position in the iShares UK Property ETF was resilient, up 4.5% over the month. Meanwhile, our Diversifying Assets once again demonstrated their benefit by delivering uncorrelated returns as both equities and fixed income fell. Our long position in the Yen gained 2.7% amid continued US Dollar weakness, and our rate-focused strategies delivered solid performance for the month.
