Week in Review: 31st of March to 4th of April
Well, that was wild! Liberation Day came and went. The size and breadth of US reciprocal tariffs was more far reaching and punitive than previously envisaged. The rouse from the rose garden saw President Trump impose a minimum 10% tariff on all exporters to the U.S. with higher penalties on those countries with significant trade imbalances. Whilst the logic behind the calculation methods for the reciprocal tariff rates and the strategy in general is scrutinised, the announcement has been made and has resulted in the average effective tariff rate in the United States rising from around 5% to around 25%, or the highest since the 1930s. The next day, China retaliated with 35% tariffs on American goods. Europe is weighing up its response and we are likely to see a continued negative news cycle form here. This has markets tariff-ied! The S&P 500 dropped 4.8% on Thursday and 5.97% on Friday, its worst day since the pandemic, the Dow shed 2,231 points on Friday marking its largest 2-day points fall in history, and the NASDAQ is now in a bear market, closing circa 22% down since its December high. Although we got off lightly on the tariff front in the UK, the international flavour of local stocks saw the UK FTSE indices down significantly, whilst European, Chinese and Japanese equities also declined.
| UK & US Equities (week ending 4/4) | Notable Markets (week ending 4/4) | ||||
| Index | Close 4/4 | Week | Market | Close 4/4 | Week |
| FTSE 100 | 8054.98 | -6.97% | Gold Futures | US$3,035.40/oz | -2.92% |
| FTSE 250 | 18365.35 | -7.55% | Bitcoin (Friday) | US$83866 | -0.62% |
| FTSE AIM 100 | 3079.27 | -8.56% | UK 10yr GB Yield | 4.45% | -26 bps |
| S&P 500 | 5074.08 | -9.08% | CBOE Volatility (VIX) | 45.31 | 23.66 |
| Dow Jones | 38314.86 | -7.86% | Euro STOXX 50 | 4866.15 | -8.73% |
| NASDAQ 100 | 17397.7 | -9.77% | GBP/USD | $1.2890 | -0.37% |
Investors fled for the safety of bonds – US Treasury Yields falling below 4%. UK Gilts, German Bunds and Japanese 10 year Bonds also rallied (yields falling). Gold didn’t tempt much of a bid this time, with Gold Futures falling after a significant rally over recent weeks.
The Japanese Yen is often perceived as a safe haven due to the stability of the currency and that Japan has persistent trade and foreign investment surpluses. As a result, the Yen appreciated by over 3% against the Greenback. The U.S. dollar index, which measures the value of the U.S. dollar against a basket of major global currencies, is now almost 7% lower than its 13th of January peak
Observation of the Week:
In this environment, people are scrambling to make sense of the profound shift in the world order. What will happen next, what impact will these trade policies have on business, consumers, inflation and growth? The crystal ball is particularly cloudy and anyone’s guess for market movements over coming days and weeks is as good as any other. One thing we do know is that markets are forward looking, they price in uncertainty and move on. For every crisis in the history of capitalism, the market has recovered. This too shall pass; the market will recover and so too your portfolio.
We recently posted an article about market corrections and the longer-term outcomes of investing following bouts of market declines and increased volatility. The CBOE VIX index acts as a ‘fear gauge’ for U.S. markets. The analysis we ran showed the future performance of U.S. shares when the VIX spikes above 27. The result is that investors receive substantially greater returns and a lower risk of negative returns, than investing on any given day. The results are even better the higher and more extreme the conditions. Well, the VIX is now at 45.31, so we’ve expanded the table to include days when the VIX was higher than 40. Most of these days occurred during the GFC and during the peak of the pandemic. But the message is clear- when markets are spooked, the market delivers greater future returns and lowers the risk of negative returns in the future. But before ploughing in, note the elevated chance of loss over 3 months for the VIX above 40 example. There is still a real risk of catching a falling knife. But knife wounds to hands aren’t critical and heal over time. (For lack of a better analogy).
Methodology: Using closing prices of the S&P 500 index since the 2nd of September 2003 when the CBOE Volatility Index methodology changed until the 12th of March 2025. Calculating average 3-month and 12-month returns and probabilities of negative returns following days the VIX reach 27 points or more. Comparing to average 3-month and 12-month returns and probabilities of negative returns over 3 months and 12 months of the S&P 500 on days when the VIX index is greater than 27 and 40 to all days on the S&P 500.
U.K. Market Performance
The FTSE 100 ended the week down 6.97%, its largest one week point and percentage decline since the week ending the 13th of March, 2020. This snapped a two-week winning streak and pulled the index down 1.44% since the start of the year, and down 9.2% from its recent high on the 3rd of March.
FTSE 100 Movers
Gainers: United Utilities Group +7.3%, Severn Trent +6.82%, National Grid +4.85%, Unilever +4.15%, Marks & Spencer +3.98%, Tesco +3.31%
Losers: Anglo American -20.69%, Entain -20.22%, Glencore -19.72%, St James’s Place -19.6%, Antofagasta -19.45%, IAG -17.8%, Standard Chartered -17.2%
Macroeconomic Data
Manufacturing & Services PMI: S&P Global showed that the UK composite PMI jumped to 51.5 in March from 50.5 in February but fell short of the flash estimate of 52. Meanwhile, the services PMI grew to 52.5 in March from 51 but missed the initial reading of 53.2.
Bank of England commentary: BoE’s Greene – stated tariffs likely to dampen UK inflation over time, however become a drag on UK production.
Notable Corporate News-
Utilities and companies with defensive characteristics were the winners out of the market carnage.
Banks, miners, energy companies and major pharmaceutical stocks amongst the biggest losers for the week.
Wise shares gained on strong profit forecast for FY 26.
Currys raised its full-year profit forecast on robust trading in early January.
U.S. Market Performance
· S&P 500: down 9% for the week and 10.5% over Thursday and Friday. This has only occurred 3 times since WW2, including COVID, the peak of the GFC and October 1987.
· Dow Jones Industrial Average (DJIA): A two-day decline of almost 4,000 points. For the first time ever, the Dow has dropped by more than 1,500 points on two consecutive days.
· Nasdaq 100: is now down 22% from its recent high indicating the technology heavy index is now in a bear market.
S&P 500 Movers
Gainers: Lamb Weston +9.5%, Molia Healthcare +6.6%, Dollar General +6%, McKesson Corporation +2.3%, American Tower +2.1%, First Solar +2%
Losers: Micron Technology -28.5%, APA Corp -28.3%, Mircochip Technology -28.1%, Freeport McMoRan -26.9%, Warner Bros. Discovery -26.8% Western Digital -26%
Notable Macroeconomic News
ISM Manufacturing PMI- shifted into contraction territory falling to 49 from 50.3. Anything below 50 indicates a contraction.
ISM Services PMI- falling, down to 50.8 v 53 expectation, but still not in contraction.
Labour Market The one glimmer of positivity included the non-farm payroll figures which showed that U.S. employers added 228,000 jobs in March, well above the 140,000 that economists had predicted. The ADP employment data echoed this. The unemployment rate came in at 4.2%, however there is conjecture over the treatment of data relating recently dismissed government employees from the DOGE axe through the public service, due to suspensions and severance packages. Initial jobless claims were slightly lower than the prior report and consensus estimates.
Fed Chair Jerome Powell Speech: In a rather poised tone, Jerome Powell called for calm amongst the backdrop of volatility. Although he acknowledged he expects Donald Trump’s tariffs to raise inflation and lower growth, he added that due to a highly uncertain outlook, the Fed will await greater clarity before considering making any adjustments to their stance.
Notable Corporate Earnings
Lamb Weston, a potato supplier for McDonald’s fries reported earnings, beating the consensus by 26.6%. They also maintained revenue and earnings guidance for the remainder of FY25 fiscal year and, given tariff uncertainty, could become a beneficiary as their main competition exports frozen French fries from Canada. It was up over 10% for the week, a rare green blip in a sea of red.
The Open: Monday 7th April
Brace yourself, it’s time to do it all again!
As we listen out for the opening bell in London, Asian stocks have seen further selling. The Japanese Nikkei 225 index is down 7.8%, pushing Japanese stocks into a bear market. Hong Kong’s Hang Seng down 11.8%, the Australian ASX 200 down 4.23%.
The FTSE 100 opened 4.95% lower, whilst the European Stoxx 50 index is down 4.27%, and the German DAX is down 10% early on in the trading day. Commodities like copper, iron ore and oil, continue to slide.
Week Ahead: 7th April -11th April 2025
Market Themes to Watch
1. Market Volatility amongst trade war uncertainty. The market will be watching for any signs of retaliation from other countries against U.S. trade barriers. Likewise, concessions could be in order for countries wishing to do a deal with the United States, or any potential off ramps proposed by President Trump could garner positive support.
2. Inflation and Fed members’ commentary: Although now a sideshow, Investors should closely monitor the upcoming Consumer Price Index (CPI) and Producer Price Index (PPI) reports, as they will provide insights into inflation trends and potential impacts on monetary policy. Persistent inflation may influence the Federal Reserve’s decisions to hold off interest rate cuts.
3. Sector-Specific Developments: Google Cloud’s Next conference in Las Vegas will showcase advancements in AI and cloud technologies, potentially influencing tech sector dynamics. Taiwan Semiconductor is set to announce its March sales data, providing insights into the semiconductor industry’s performance. Key healthcare summits in Boston will focus on health industry dynamics amid governmental restructuring, which could impact healthcare investments.
4. Global Economic Developments: geopolitical and economic events in Panama, including a halted port deal and strategic U.S.-Panama meetings, may influence global trade considerations
5. American Consumer Sentiment: The Michigan consumer sentiment survey will post its preliminary report for the month, with this data likely to catch the
sentiment of respondents regarding their personal finances in light of the trade war.
Upcoming Economic Data – U.K.
Halifax House Price Index (Monday)
RICS Housing Index (Thursday)
GDP Monthly Estimate (Friday)
UK Trade Data (Friday)
Economic activity and social change in the UK, real-time indicators (Friday)
Industrial Manufacturing Production (Friday)
Upcoming Economic Data – United States
Fed Speeches – Kugler on Monday, Daly on Tuesday, Barkin on Wednesday, Logan on Thursday, Williams on Friday
FOMC Minutes (Wednesday)
Core Inflation Rate (Thursday) Forecast to be 3%. Last months forecast was 3.2% v actual result of 3.1%.
Initial Jobless Claims (Thursday)
Monthly Budget Statement (Thursday)
Core Producer Price Index (Friday)
Michigan Consumer Sentiment- Preliminary figures
Upcoming Corporate Earnings
Financial Sector:
· JPMorgan Chase – Always watched closely as a bellwether for the financial sector and broader economy.
· Wells Fargo – Insight into US consumer credit health and mortgage activity.
· Morgan Stanley – Exposure to wealth management trends and investment banking.
· BlackRock – Important for gauging institutional and retail investment flows, especially into ETFs.
· Bank of New York Mellon – Offers a view into custody banking and global fund movements.
Airlines
· Delta Airways: is scheduled to report its earnings, which will be important to watch given the broader travel and transportation sector dynamics amid current market conditions.
UK
· Tesco: is scheduled to release its preliminary results for the 2024/25 financial year on Thursday. This announcement will provide insights into Tesco’s financial performance over the past year, including revenue, profit margins, and strategic developments. Investors and analysts will be particularly interested in how Tesco has navigated recent market dynamics, such as competitive pressures from rivals and broader economic factors affecting the retail sector.
What does this mean for you?
Economists are now likely feeling the same way scientists felt during the pandemic. The reality is, with such a complete change to the status quo, the future consequences are unknowable. As market movements are currently driven by headlines rather than fundamentals, making a call right now would essentially be a flip of a coin. At any times, the next bombshell could be dropped on Truth Social or X. There’s likely another leg down from here as each aggrieved country follows China’s lead and retaliates with their own tariffs, further muddying the picture and further increasing prices for consumers and dampening growth. The worst case involves coordinated and sharp retaliation from the countries on the U.S., which will have a significant impact on global growth. However, there’s also a likely case to be made for countries who are able to ‘cut a deal’. Friday saw Vietnam come to the dealer’s table, with a deal possibile after a productive call, causing shares in Nike and Lululemon to jump on the news late in the day. There is a history of the Trump administration walking back on announcements, using a strong arm to bring about negotiations. Then, there’s the practicalities and legalities of bureaucracy to impose the tariffs. Plus, although Jerome Powell didn’t give much away on Friday, if the Federal Reserve announce an earlier than expected rate cut, that could provide a bump for equites.
Trying to guess what will happen in the next three days or three months is a futile exercise, but in one to two years? Historical evidence favours the brave and tends to handsomely reward those with a longer-term view. If not done already, selling shares now and going into defensive assets could seriously hamper long term returns. Maintaining discipline, investing in quality companies and being well diversified are the key ingredients to whether the storm we are already in, which too shall pass.
DISCLAIMER This article is for information purposes only and no part of it or its contents are deemed to be nor should be taken as advice. It does not constitute recommendations to buy or sell any securities mentioned. Past performance of investments is no guide to future returns and you may get back less than you invested. Capital at Risk.