Monthly economic and market review: April 2025

Liberation Day never promised us a rose garden

Melania Trump’s infrequent stays at the White House have left the president as something of a bachelor in Washington DC. His “Liberation Day” speech from the Rose Garden on the 2^nd of April, however, was all about handing out punitive tariffs rather than endearing comments and long-stemmed roses. The so-called “reciprocal” tariffs included a 10% baseline tariff on all trading partners (except Canada and Mexico) along with country-specific tariffs on around 60 countries based on trade balances, level of trade and perceived trade barriers. China bore the brunt of the tariff announcement with a 34% tariff imposed on top of an existing 20% tariff for a total tariff rate of 54%. The equity market went into an immediate tailspin (see the chart below), bond yields spiked higher and the dollar fell to $1.14/€, its worst level against the euro since November 2021. Market uncertainty and fear, as measured by the VIX index, ramped higher to leave the volatility index at its worst level since late 2021. Trump ignored the market uproar for a week before announcing a 90-day “pause” on the introduction of the tariffs in order for trade deals to be negotiated in what he promised would be “90 deals in 90 days”. The tariff reprieve gave markets some hope that sanity would ultimately prevail and that news induced a sharp equity market rally.

The equity market turnaround in April was “V”-shaped on the local market but more of a “W” shape in the US markets. The more volatile US market was characterised by the escalating tit-for-tat tariff war with China, Trump’s introduction of further tariffs on imported cars and car parts and Trump’s vitriolic criticism of Federal Reserve Bank Chairman, Jerome Powell. The president then dialled back on all of these issues, advising that trade talks with China had begun (denied by China) and that auto parts would not be double-tariffed after the imposition of metals tariffs. Trump also promised that Powell would not be fired, even though the president was powerless to do so. This gave the market more confidence that the independence of the central bank was not in jeopardy. The market also had to digest a 0.3% contraction in the US economy in the first quarter, after growth of 0.4% was expected. Much of the blame could be attributed to the decline in net exports as importers rushed to bring in vast quantities of goods ahead of the tariff implementation date. The market pulled back sharply post the economic release but before market close on the same day, the S&P 500 had regained all of its losses and closed higher. A slowdown in the US economy this year is expected but the surprise quarterly contraction was quickly interpreted as a once-off tariff-induced shock rather than the opening quarter of a US recession.

From an all-time high on the S&P 500 of 6,144 index points on 19 February, the market slumped 18.9% to a low point in April of 4,982 points. It then rallied 11.8% to close out April at an index level of 5,569 points (9.4% below the all-time peak). When all was said and done in April, the sectors that outperformed the S&P 500 index’s -0.76% return included Information Technology (+1.6%), Consumer Staples (+1.1%), Communication Services (+0.6%), Industrials (+0.2%), Utilities (+0.1%) and Consumer Discretionary (-0.3%). The underperforming sectors included Energy (-13.7%), Health Care (-3.8%), Financials (-2.2%), Materials (-2.2%), Real Estate (-1.3%). The US first quarter earnings reporting season began in April and got into full swing during the month, The reported results helped give a lift to some individual counters (Netflix +21%, ServiceNow +20%) but hurt others with poorer results (UnitedHealth -21%, Chevron -19%, Starbucks -18%).

The JSE, in turn, lost 9.5% from its 19 March all-time high of 90,149 index points to trade down to a low of 81,553 points on 04 April. The local benchmark index then rallied to consecutive daily all-time record closes over the last four trading days of the month. After all of the craziness of April, the FTSE/JSE All Share index closed the month 3.3% higher at a level of 91,583 points, up 12.9% from the low of the month. From a sectoral perspective in April, Financials rose 2.6%, Resources were 1.8% higher and Industrials closed 1.5% higher. Strong individual company results were the reason for a number of the bigger market gainers in the month while the gold shares were lifted by new all-time records in the bullion price. Lower commodity prices hurt the rest of the resources counters and the list of losers was littered with the likes of Sasol, South32, Glencore and the platinum miners. Aspen Pharmacare lost a quarter of its value in April after warning of a “material contract dispute” on an mRNA manufacturing contract that could result in earnings being as much as R2bn lower.  See the appendix below for a broader list of market movers on the JSE and the S&P 500 during the month and the first four months of the year so far.

FTSE/JSE All Share Index (blue, RHS) & S&P 500 (green, RHS) – last 12 months

Source: Factset

Don’t pop the champagne corks just yet

The equity market recovery is welcome but we’re not out of the woods just yet. The 90-day pause period on tariffs is ticking by and we have yet to hear of any agreed deals. Corporate results from the S&P 500 companies have generally beaten expectations, particularly on the earnings line, but the impact of tariffs on future earnings has been top of mind for investors. Numerous companies have quantified what they expect the impact of tariffs will be on earnings but for many the impact is still indeterminable. Apple announced a potential $900m hit to second quarter earnings due to tariffs and Thermo Fisher Scientific expected $400m less sales to China as a result of tariffs. Many companies retracted previous guidance while others simply refrained from providing any guidance in the uncertain environment. Overall, there is still a high degree of uncertainty over the impact of tariffs on economic growth, employment, inflation and ultimately corporate revenues, earnings and stock prices. That level of uncertainty makes for difficult management of monetary policy and that’s why the Federal Reserve Bank is expected to leave rates unchanged for the foreseeable future. Earnings downgrades on the S&P 500 companies are coming through but whereas we might have been expecting 15% in earnings growth this year, the number is now closer to (a still respectable) 10%. Amidst all of the uncertainty, investors won’t be toasting the market bounce just yet, particularly in the US where champagne might soon become 200% more expensive.

Appendix: Market Movers