Ear to the Ground

25 April 2025

Are lessons being learned?  Whilst some comfort had previously been taken from the news that upcoming tariffs had been paused by 90 days, with the exception of those on China, investment markets have still remained unsettled, with uncertainty being seen in both equity and fixed income markets in the US.

It is not only tariff rhetoric causing this, but also Trump’s apparent willingness to attack other areas, such as Federal Reserve monetary policy.  Just last week we saw the President attack Governor Jerome Powell for his unwillingness to reduce interest rates, believing that there is “virtually no inflation”.  Trump’s comments came after Powell warned that “Federal debt is on an unsustainable path; we are now running crisis level deficits at full employment.”

This, understandably, was not well received by markets.  Trump and his leaders cannot be accused of not keeping a close eye on markets, however, and whilst clearly unhappy, Trump was quick to confirm that he has no intention of firing Powell.  We doubt however that this is the last attack we will see.

So what has this meant for asset markets during April.  Taking the MSCI World index as a proxy for global equities, in US dollar terms being its base currency, we remain in negative territory but the swing seen is notable.  At one point the index was down in excess of 10%.  At the time of writing that fall is closer to 2%.  Selling out could therefore have proven costly in terms of investment return.

From an economic perspective eyes were keenly focussed on the latest International Monetary Fund (IMF) economic outlook release this week.  Here we saw a notable shaving of the expected world economic growth rate for 2025.  The IMF in January had forecast a figure of 3.3% but have cut 0.5% from this figure, now predicting 2.8% instead.  Both developed and developing markets saw a downward adjustment of 0.5% overall.  Within developed markets very few countries went unscathed, with growth for the US downgraded by 0.5%, the Euro Area 0.9%, Japan and the UK also by 0.5%.  Within developing countries it was Mexico who saw the largest downward revision at 1.7%.

The organisation was very clear in its assessment and cause of these downward revisions.  The IMF now believes that the global economy is at a “critical juncture.”  “Major policy shifts are resetting the global trade system and giving rise to uncertainty that is once again testing the resilience of the global economy.”  If followed through with, tariffs announced on the 2^nd and 9^th April will be the largest seen in the last 100 years.

Whilst the stock market isn’t the economy, there is historic evidence which does shows that an equity bear market in the absence of a recession is typically shorter.  So all eyes on economic data and corporate earnings forecasts!

This article is for information purposes only and should not be construed as advice.  We strongly suggest you seek independent financial advice prior to taking any course of action. 

The value of any investment can fall as well as rise and investors may get back less than they originally invested.  Past performance is not necessarily a guide to future performance.

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