Monthly analysis April 2025

30 may 2025
April was the most dramatic month for global equities in 2025 so far. The MSCI All-Country World Equity index finished the month with a modest gain of 0,8% (in USD) but that does not reflect the frenzied path it went through – at one point the index had sunk almost 13% since the end of March, only to recover handsomely by the end of April. The reason for all this epic volatility was the trading “nuclear bomb” that Donald Trump dropped at the beginning of the month announcing on April 2nd severe tariffs on all countries with which the USA trades. The reciprocal tariffs levied on many countries were broader and more punitive than analysts expected, varying from the universal minimal rate of 10% on all imported goods to 145% on most Chinese goods (or even 3521% on imports of solar panels from Cambodia). The American president called it “Liberation Day”, or the day on which his administration claimed to free American industry from the unfair trade practices of the rest of the world – but it seemed to mostly free everyone from some stock market gains. Market volatility shot up as uncertainty peaked about the potential impact of the new draconian US tariffs on future inflation (elevating it) and economic growth (dampening it) – and U.S. equities took a hard hit. In the first week of April, S&P500 lost over 9%, while the VIX (a measure of market volatility) spiked to 60, the highest level since the Covid-19 pandemic. Gold hit a new all-time high as investors sought refuge from their inflation fears and overall uncertainty. The US dollar continued to weaken: against a basket of currencies, it fell 4% for the month, and is now over 8% lower since the beginning of the year, worsening the performance of US stocks for non-US based investors. In fact, international equity continued to outperform U.S. stocks by a wide margin, and this helped to offset the fall of U.S. equity in portfolios with global diversification. Developed-market equities performed best for the month, driven by increasingly stimulative policies within Europe, including greater fiscal spending for re-armament and a European Central Bank rate cut. China’s government also indicated additional stimuli, however, trade tensions with the U.S. weighed on the stocks returns. For the first four months of the year international developed-market large-cap stocks have outperformed U.S. large-cap stocks by over 15%, which has not happened since 1993. All sectors sank into the red. Not surprisingly, the more cyclical themes and those that have done very well in recent years, such as cloud & AI, semiconductors, dropped the most. Surprisingly, some normally more defensive sectors (like Healthcare, for example) also took solid hits. The worst performing sector was Energy, as oil prices fell by 16% (in USD) during the month, amid rising recession fears and a decision from OPEC members not to limit supply. Eventually, the market turmoil eased later in the month, as the U.S. administration softened its tone and pulled back on many tariff threats – announcing a 90-day pause, and opening doors to negotiation. Stocks quickly rallied and by the end of April recouped much of their monthly losses. Fixed income markets finished the month little changed but actually went through significant intra-month volatility too. The 10-year U.S. Treasury yield fluctuated between 4% and 4.6%, before ending the month where it began. The stronger Yen and Euro versus the US dollar also helped to lift global aggregate Bonds indices into positive territory (in USD terms). Increasing expectations about potentially lower interest rates in the future provided support to European government bonds over the month, and their yields generally fell (bond yields and bond prices move in opposite directions). Over the past year, however, interest rates have been trending generally downward, as growth slows and central banks relax policies, resulting in solid returns for bonds in the last 12 months.
American shares generally fell in April, underperforming most other regions. Of the major U.S. indexes, the flagship S&P500 fell 0.8% (in USD), while the tech-heavy NASDAQ 100 even recorded a hefty gain of 1.5%. Stocks experienced gigantic swings following “Liberation Day” on 2 April when President Trump announced sweeping and much larger-than-expected tariffs on imported goods – a 10% tariff rate on all US imports and higher "reciprocal" tariffs for countries with which US has large trade deficit. The market reaction was brutal, as equities experienced their second steepest sell-off in history (worst was only the Covid-19 pandemic). Some of the most hurt were the previous high-flyers, the Magnificent Seven and AI-related stocks. NASDAQ entered bear market (more than 20%+ drop), while the broader S&P500 narrowly avoided it, sinking 19% from February’s peak to April’s low. The new tariffs were later suspended for 90 days for most countries, and this helped shares recover. The American equities finished the month after 3 consecutive positive weeks, bringing them close to where they started the month. The Energy and Healthcare sectors were the most notable laggards, while Technology was among the top gainers. U.S. small-cap stocks again were the worst performing ones – they are down nearly 12% for the year, while the U.S. large-cap stocks have lost just about 5% at April’s end. On the macroeconomic front, investors had to digest some ambivalent data: first quarter GDP shrank (-0.3%) on an annualized basis, but the U.S. economy demonstrated a solid momentum – resilient labor market with low unemployment rate, and earnings growth that surprised to the upside. Inflation (as measured by the consumer price index, CPI) fell to 2.4% in March (from 2.8%). The trade deficit swelled as companies hurried to build up inventories of foreign goods before tariffs came into effect. Economic moderation could be sensed though – a government spending declined over Q1, and the composite Purchasing Managers' Index (PMI) fell to 51.2, with the decline driven by the services sector, which came at 51.4; the manufacturing index rose slightly to 50.7 (any level below 50 indicates contraction). Furthermore, business expectations and consumer sentiment fell drastically to levels last seen during the 2020 global pandemic. Such drop in confidence is bad because it deters investment and spending, increasing the risk of a U.S. recession in the near future. Bond markets also experienced significant fluctuation since the “Liberation day” tariffs were announced, but remained little changed overall. The US Treasury yield curve steepened, as yields fell in shorter maturities (on fears of subdued economic growth) but rose at the longer-end of the curve (on fears of higher future inflation). The yield on the benchmark 10-year US Treasuries reached a peak of 4.6% in mid-April, before coming down to 4.2% at the end of the month. Despite the likelihood of inflation accelerating over the next few months, credit markets are pricing in up to four rate cuts by the end of the year, assuming that the slowing economy would weight heavier on the Fed’s decision.
European shares were slightly positive in April despite the considerable instability brought by the aggressive Trump’s tariffs. The European Union decided to refrain from imposing retaliatory tariffs, in an effort to create favorable conditions for negotiations with the US administration. This decision, coupled with the positive development in Germany, where a new government was formed, provided some relief, but the European equity market overall still retreated over the month. The pan-European STOXX Europe 600 index ended April 1.2% lower but many continental stock exchanges recorded gains: Germany’s DAX closed 1.5% higher. Just like in the US, Energy was the weakest sector, while defensive plays, like Consumer staples and Utilities, outperformed. The Eurozone’s GDP grew by 0.4% in the first quarter of 2025 compared with the last quarter of 2024, and by 1.2% year on year. German GDP also expanded by 0.2%, quarter on quarter. The European Central Bank (ECB) cut interest rates again by 0.25% in April, taking the rate on its deposit facility to 2.25%, amid concerns that a trade war would hurt the currency bloc’s economic growth. Eurozone’s composite PMI fell to 50.1 in April, driven by a decline in the services (49.7), while the manufacturing PMI remained almost unchanged at 48.7 – that is despite the Trump administration implementing a 10% tariff (and 25% on European cars) early in the month. The manufacturing PMI found support in lower energy prices and expectations for fiscal stimulus, which somewhat offset the trade-related headaches. Similarly to the US, the Euroarea’s consumer confidence index also soured, confirming that the trade war and the festering conflict in Ukraine are weighing on economic sentiment. PMIs in UK also showed deterioration - the composite index moved into contractionary territory (48.2), driven by global headwinds arising from the trade uncertainty. The UK’s stock index FTSE100 fell in April by -1% (in GBP), but the more domestically focused FTSE250 index outperformed the more internationally focused large cap FTSE100. In Europe, yields fell across all Eurozone government bond markets and UK gilts in April. Increasing confidence about the prospect of lower interest rates ahead provided support for European sovereign debt over the month, reconfirmed by the ECB’s rate cut. In the UK, government bond yields were very volatile over the course of April but ultimately ended the month lower.While the Bank of England did not meet in April, market expectations for a cut in May increased as March inflation encouragingly declined (to 2.6% from 2.8%), while economic activity data softened. In general, credit spreads fluctuated with risk sentiment in April, selling off sharply on the back of the Liberation Day tariff announcements, only to retract later much of the move. Higher quality bonds (investment grade) continue to demonstrate resilience in the face of recession risks, and outperformed high-yield bonds.
April brought disappointment for investors on the Bulgarian Stock Exchange. Amid extremely volatile international trading, the indices of our local bourse ended the month with a drop of around 2% on average. The second edition of Investor Day: Embracing Opportunities was held during the month. This is an initiative of the BSE that brings together all capital market participants – established companies, listed on BSE, financial analysts, Bulgarian and foreign investors, banks, asset management companies and investment intermediaries. The aim is to provide a platform to discuss market trends, economic prospects and opportunities for financing the growth of Bulgarian companies. During the month, there was one IPO – of the real estate company Tiz Invest AD, which successfully raised over BGN 13.7 million. Of the blue-chip companies on BSE, the best performance for the month was achieved by the producer of healthy foods Smart Organic AD, which chalked up a rise of almost 8%, while among those with the worst performance was the technology company Shelly Group AD, whose share price fell by 13%.
Source: Bloomberg, BSE