April Market Commentary

Resilience Over Reaction: The Case for Dividend Leaders

“Uncertainty is the only certainty there is.” – John Allen Paulos

Last month, investors faced this truth head-on as tariff tensions, economic headwinds, and shifting sentiment stirred market squalls.

The S&P 500 dipped -0.70% over the month, while emerging markets gained 1.34%, reflecting a tale of caution and opportunity.

With the Federal Reserve suspending rate cuts amid core PCE inflation rising to approximately 2.90% and President Trump’s proposed tariffs roiling global trade expectations, this commentary reviews April’s key moves and highlights strategies to build resilience in uncertain times.

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Developed Markets Performance

Executive Summary 

Developed markets experienced volatility in April. The MSCI World Index achieved a modest 0.94% return, while the S&P 500 declined by 0.70%, reflecting concerns over tariff implementations and economic slowdown. European indices displayed mixed results: Germany’s DAX rose by 0.90%, boosted by fiscal stimulus, whereas the UK’s FTSE 100 fell by -1.20% amid energy sector weaknesses.

Market Summary 

The MSCI World Index’s 0.94% monthly gain masks a challenging year-to-date performance of -0.77%, with the S&P 500 down -4.90% YTD. Following President Trump’s ‘Liberation Day’ announcements, tariff uncertainty triggered a peak-to-trough S&P 500 drawdown earlier this year. The CBOE Volatility Index (VIX) spiked to 52.30 in early April but settled lower by month-end, though it has remained above 20 for 25 consecutive days—the longest streak since 2022.

Economic indicators signalled caution, with Q1 GDP contracting -0.30% due to a surge in imports, and a sharp drop in consumer confidence (Conference Board’s index at 86.00, the lowest since April 2020) signals rising recession risks, now estimated at 3.00%. Despite this, a soft landing remains the base case (50.00% probability), supported by potential tax cuts and deregulation. Bond yields fluctuated, with the US 10-year yield stabilising above 4.00%, while a rebound in the US dollar alleviated concerns over its global reserve status.

The UK market faced significant headwinds in April amid intensifying global trade tensions and economic uncertainty. The MSCI UK indices showed resilience with notable rallies in defensive sectors such as retailers and housebuilders, including Dunelm and Berkeley, which gained over 14.00%, and Sainsbury’s, up nearly 12.00%. Despite this, economic sentiment weakened sharply, with the IMF cutting the UK’s 2025 growth forecast to 1.10%, the lowest among major European economies, and the composite PMI falling to a 29-month low of 48.20, signalling contraction. Consumer confidence deteriorated amid rising cost pressures, though retail sales surprised positively.

On the policy front, the Bank of England is widely expected to cut interest rates by 25 basis points to 4.25% at its May meeting, marking a shift toward easing amid concerns over the impact of US tariffs and slowing global trade. Some Monetary Policy Committee members advocate for more aggressive cuts, with forecasts suggesting up to four rate reductions this year, potentially bringing rates down to around 3.50% by year-end. The BoE is also continuing to reduce its quantitative easing holdings, aiming to support economic stability while monitoring inflation risks. Overall, UK markets remain cautious but show pockets of resilience as policymakers prepare to respond to mounting external and domestic pressures.

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Emerging Markets Performance

Executive Summary 

Emerging markets (EM) outperformed in April 2025, with the MSCI EM Index returning 1.34%, led by India’s 3.00% gain and China’s 1.80% rise, driven by stimulus measures. However, Mexico (-1.50%) and Brazil (-2.00%) lagged due to tariff risks and currency pressures.

Market Summary  

The EM Index’s 1.34% return builds on a 3-month gain of 2.54%, highlighting resilience amid global trade tensions. India’s BSE Sensex increased by 3.00%, driven by domestic demand, while China’s equity markets gained 1.80%, supported by fiscal stimulus and optimism around AI-driven technology sectors, such as the DeepSeek chatbot breakthrough.

Tariff fears, on the other hand, continue to be a drag, with China likely to ease monetary policy further in response to deflationary pressures. Mexico and Brazil faced challenges from a weakening US dollar (DXY breaking below its 2022-2025 range) and oil price volatility, highlighting the need for selective exposure within EM.

Forward Outlook: Portfolio Considerations

April’s volatility underscores the importance of diversification and defensive positioning. Dividend growth stocks, such as those in the S&P 500 Dividend Aristocrats Index (down only 0.70% YTD versus the S&P 500’s -4.90% decline), offer stability amid uncertainty. These companies, often with strong balance sheets and consistent cash flows, have historically outperformed during volatile periods, providing a cushion against market swings. Infrastructure remains a bulwark, with data centre demand projected to reach 181 zettabytes by year-end, offering inflation protection.

Gold is a key hedge, with higher prices (up 28.00% YTD) due to central bank demand and tariff-induced inflation fears, though stretched positioning suggests waiting for a better entry point. Developed Market Investment Grade (DM IG) government bonds are attractive, with US 10-year yields expected to drift towards 4.00% in a soft-landing scenario, providing yield stability. Within equities, a balanced approach across regions is prudent: US small caps may benefit from protectionist policies, while China’s technology sector offers growth potential, supported by policy stimulus. Europe’s industrials and banks are poised to gain from fiscal spending, though tariff risks linger.

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Disclaimer:

The commentary you find on this page is for information only; it is not intended as research or a recommendation suitable to your circumstance. Please seek financial advice from a professional before acting on investment decisions.

As is the very nature of investing, there are inherent risks, and the value of your investments will both rise and fall over time. Please do not assume that past performance will repeat itself and you must be comfortable in the knowledge that you may receive less than you originally invested.