19 May 2025 5 minute read
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Our investment experts delve into April’s key trends: market volatility following ‘Liberation Day’, resilient earnings from AI companies, and a continued rally in gold as investors seek safety.

Important information

Top 3 investment themes – April 2025         

‘Liberation Day’ market moves

The reciprocal tariffs announced by President Trump on April 2, which he said would “liberate” the US economy, led to a huge global sell-off. 

The US equity market bore the brunt of the pain and the S&P 500 fell by almost 19 per cent from its February highs, as of April 11, accompanied by a decline in the US dollar. The Volatility Index (VIX), a gauge of expected stock-market volatility, reached its third-highest level in the 21st century – the other two episodes occurred during the 2008 Global Financial Crash (GFC) and COVID-19 pandemic. 

Later in the month, President Trump’s announcement of a 90-day pause on reciprocal tariffs, except for those imposed on China, helped calm markets. Reflecting the policy uncertainty, the US equity market experienced big swings, recording both its best day since the GFC and its worst day since the pandemic turmoil in March 2020. Ultimately though, the US equity market ended down just 0.7 per cent. 

Resilient company earnings

Even as markets were reacting to “Liberation Day”, major companies began reporting their first-quarter earnings. Microsoft, Meta, and Alphabet all delivered strong results, boosting optimism about the outlook for AI growth. This was especially notable given the caution around AI, following the January release of a lower-cost AI model by Chinese company DeepSeek. These positive results somewhat offset more disappointing results, such as those announced by Tesla, and in the round the Magnificent Seven (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla) were up 1.3 per cent over the month.

Gold continues its rally

Gold soared past a record high of $3,500 per troy ounce in what was considered a ‘flight to safety’

Markets were also shaken this month after President Trump publicly criticised Federal Reserve (Fed) chair Jerome Powell for his decision not to cut interest rates. This sparked concerns the president might try to oust Powell, raising questions about the Fed’s independence. However, those concerns eased after President Trump clarified he had “no intention” of firing Powell, bringing an instant relief rally to markets. Nevertheless, gold soared past a record high of $3,500 per troy ounce in what was considered a “flight to safety”. Gold was up 25 per cent year-to-date, marking its strongest start to a year since 2006.

How did we position MAF Core and Plus portfolios?

Growth assets

April was another volatile month for risk assets, with uncertainty regarding US tariffs resulting in key regions ending the month in negative territory. 

The announcement of US reciprocal tariffs on April 2, and the subsequent 90-day pause on said tariffs, resulted in the S&P 500 posting both its worst and best daily performance in recent years. 

The S&P 500 posted both its worst and best daily performance in recent years

The announcement of a pause contributed to Japanese and European equities ending the month in positive territory. European equity markets continued their rally following the announcement of new German fiscal policies and renewed hopes for a ceasefire in Ukraine, and were up 9.2 per cent year-to-date as of April 30. Broader equity markets also saw a rebound towards the end of month following optimism about a de-escalation in US-China trade tensions and a positive start to earnings season.

Our underweight positions in European and US equities within our MAF Plus strategy added to performance this month. (We have since closed the European equities position, reflecting improved investor sentiment following the “Liberation Day” announcement.) 

Our underweight position in the US dollar also contributed positively and we reduced exposure using foreign exchange forward contracts in response to recent pressure on the currency. Additionally, we closed our overweight position in US healthcare relative to the broader US market to take profit, as the broader market sold off.

Defensive assets

Global fixed income generally delivered positive returns in April, although longer-dated US Treasury bond yields rose at their fastest pace since March 2020. European bonds benefited from the volatility within the US market, delivering their strongest  monthly performance since November as investors questioned the “safe haven” status of US Treasuries. UK Gilts also performed well over the month as yields trended downward, with a pessimistic report on growth by the International Monetary Fund (IMF) suggesting the Bank of England (BoE) would need to cut rates further.

Global fixed income generally delivered positive returns in April

In terms of our active positions, our overweight position in Gilts and German government bonds added to performance in April, while our underweight to French government bonds marginally detracted. Our 10-year US Treasury overweight also contributed positively, as we closed the position amid rising long-term yields, preferring duration exposure to shorter-term bonds.

Lastly, we added to German Bunds, as government bonds provide additional diversification in our House View scenario of a global slowdown in growth over the next few years.

Alternative assets

Alternative assets continued to perform well during the market volatility, with both AIMS and our physical gold position delivering positive performance.

Market outlook and positioning: what do we believe happens next?

With signs of trade deals progressing during the 90-day pause in reciprocal tariffs, the broader outlook for equities has turned more positive, despite ongoing challenges to the growth outlook. In our fixed-income allocation, we maintain overweight positions in US Treasuries, German Bonds and Gilts. 

Within the US, we have focused our duration exposure in shorter-term bonds which are less exposed to long-term bond sell-offs. In the case of Europe, most notably the UK, downside growth risks could lead to continued central bank easing, above that which is currently expected by investors. For France, we have opened an underweight position as we see specific fiscal risks where higher increases in spending, compared to the rest of Europe, are likely to put downwards pressure on bond prices.

Reference

  1. Past performance is not a reliable indicator of future performance.
    The MAF Core range is a multi-asset solution offering exposure to a broad range of global growth and defensive assets with a passive management bias. The MAF Plus range is a multi-asset solution offering exposure to a broad range of global growth, defensive and alternative assets with an active management bias. Both fund ranges aim to manage risk and deliver long-term growth for clients.

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Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited ("Aviva Investors"). Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested.

The Aviva Investors Multi‐asset Funds comprise two ranges, each with five funds (together the “Funds”): Aviva Investors Multi-asset Plus Fund range comprises the Aviva Investors Multi‐asset Plus Fund I (“MAF Plus I”), the Aviva Investors Multi‐asset Fund Plus II (“MAF Plus II”), the Aviva Investors Multi‐asset Plus Fund III (“MAF Plus III”), the Aviva Investors Multi‐asset Plus Fund IV (“MAF Plus IV”) and the Aviva Investors Multi‐asset Plus Fund V (“MAF Plus V”) Aviva Investors Multi-asset Core Fund range comprises the Aviva Investors Multi‐asset Core Fund I (“MAF Core I”), the Aviva Investors Multi‐asset Fund Core II (“MAF Core II”), the Aviva Investors Multi‐asset Core Fund III (“MAF Core III”), the Aviva Investors Multi‐asset Core Fund IV (“MAF Core IV”) and the Aviva Investors Multi‐asset Core Fund V (“MAF Core V”).

The Funds are sub-funds of the Aviva Investors Portfolio Funds ICVC. For further information please read the latest Key Investor Information Document and Supplementary Information Document. The Prospectus and the annual and interim reports are also available on request. Copies in English can be obtained free of charge from Aviva Investors UK Fund Services Limited, 80 Fenchurch Street, London, EC3M 4AE. You can also download copies from our website. Issued by Aviva Investors UK Fund Services Limited. Registered in England & Wales No 1973412. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119310. Registered address: 80 Fenchurch Street, London, EC3M 4AE. An Aviva company.