Global Markets
In April 2025, global equities experienced a significant sell-off, marking a turbulent period in financial markets that was soon followed by signs of recovery. Trade tensions escalated dramatically during the first week of April when U.S. President Donald Trump announced a new set of tariffs on April 2, a date he dubbed “Liberation Day.”
This announcement included a baseline tariff of 10% on imports from all countries, with specific sectors, such as steel and aluminium, facing tariffs as high as 50%. The immediate market reaction was a sharp decline, reflecting investor concerns over the potential impacts on global trade, inflation, and economic growth.
Recognizing the need to stabilize the markets, President Trump halted the planned tariff increases on April 9 and subsequently introduced significant exemptions for various countries and sectors, including key trading partners such as Mexico and Canada. This decision, coupled with reports of better-than-expected earnings from major corporations, fuelled investor optimism that the worst of the tariff escalations had passed.
Furthermore, positive economic data released later in April, showing an unexpected rise in consumer spending and a rebound in retail sales, contributed to renewed confidence.
Chart 1: S&P 500 performance YTD (Source: Infront)
U.S. Treasury yields behaved unpredictably, deviating from their typical role as a safe haven during equity market turmoil. After the announcement of sweeping tariffs on April 2, the yield on the 10-year Treasury note initially dropped to around 3.65%, as investors sought the security of government bonds. However, this move reversed quickly, and by mid-April, the 10-year yield had surged to 4.31%, despite ongoing declines in the stock market. The shift caught many market participants off guard, as bond prices fell even in the face of risk aversion.
Several factors contributed to this volatility: expectations that tariffs would drive up consumer prices, renewed speculation that the Federal Reserve might tighten policy to keep inflation in check, and a weak response to Treasury auctions, which signalled reduced investor appetite. There was also speculation that China, a major holder of US debt might sell-off treasuries as a retaliatory measure, adding to the sell-off pressure. However, there is no evidence that this materialised. Adding another layer of complexity, the U.S. dollar weakened in April 2025.
While typically a safe-haven, the dollar's slide reflected fears about the long-term consequences of the trade conflict and its potential toll on U.S. growth. The falling dollar also reflect a decline in demand for dollars in the face of reduced trade with the United States. Developed markets ended the month up 0.9% and emerging markets ended the month up 1.3% in USD. Returns outside of the US were buoyed by the weaker dollar.
Chart 2: US bond yield (Source: Trading Economics)
Chart 3: US dollar Index (Source: Trading Economics)
United States: Inflation dropped to 2.4% in March, its lowest since September 2024, but GDP contracted by 0.3% in Q1 2025, marking the first decline in three years. Fed minutes highlighted concerns about inflation from elevated tariffs. Consumer sentiment also fell to 52.2 in April, its lowest since mid-2022. On April 30, the U.S. signed a deal with Ukraine for a joint development fund linked to reconstruction and raw material access.
Eurozone: Inflation held steady at 2.2% in March, slightly above expectations. The ECB cut interest rates by 25 basis points to 2.40%, and GDP grew by 0.4% in Q1, signalling modest recovery.
United Kingdom: Inflation eased to 2.6% in March, its lowest since mid-2023, while Q4 2024 GDP confirmed a 0.1% growth. Unemployment remained steady at 4.4%, reflecting a stable but stagnant economy.
China: Inflation fell by 0.1% in March, and Q1 GDP growth slowed to 1.2%. The People's Bank of China held rates steady for the sixth month amid ongoing trade tensions with the U.S.
Local Markets
South African equities defied gravity once again, gaining 4.3% for the month of April. Financials and Industrials both ended the month up 5.0% and Resources ended the month up 2.4%. Initially, South African equities tumbled in response to the United States’ “Liberation Day” tariff announcement (discussed earlier), which included a steep 30% levy on South African exports, falling 9% in the first few days of the month before staging a strong recovery, after President Trump deferred the planned tariff increases. South Africa took full advantage of the 90-day deferral period, appointing ex-Deputy Finance Minister Mcebisi Jonas as special envoy to rekindle ties with the US.
Political tensions in South Africa eased recently after Finance Minister Enoch Godongwana dropped the proposed increase to the value-added tax (VAT), which had sparked considerable backlash. The plan, aimed at raising VAT from 15% to 16% over two years, was intended to help close a significant budget gap of R75 billion. However, the proposal faced strong resistance from both within the coalition government and from the public.
The decision to withdraw the VAT hike helped restore confidence in the stability of the GNU and was welcomed by investors wary of policy uncertainty. With the VAT increase now off the table, the government is exploring other ways to balance the budget, likely through spending adjustments and alternative revenue measures.
Unfortunately, fundamentally, we are not seeing improvement. South Africa’s unemployment rate remains among the highest globally and this has not yet been addressed by GNU policymaking. The expanded unemployment rate increased by 1,2 percentage points to 43,1% in Q1:2025 compared to Q4:2024. (Source: STATSSA)
Chief Investment Officer, Duane Gilbert’s Commentary
Our market outlook for 2025 remains cautiously optimistic. The prospect of U.S. Federal Reserve rate cuts in a non-recessionary environment presents a broadly supportive backdrop for equities. However, we anticipate heightened volatility in the near term due to lingering uncertainty around U.S. trade policy. In response, we have selectively reduced our global equity exposure to manage potential downside risks.
The U.S. continues to be our preferred investment destination. Following the year-to-date market correction, valuations have become more attractive. We remain confident in the resilience of the U.S. economy, underpinned by robust consumer spending. Additionally, we expect further easing of trade tariffs as the year progresses and anticipate that the economic impact of former President Trump’s tax-reduction policies will begin to materialize in the second half of the year.
While economic performance in Europe and Japan remains subdued, signs of recovery are emerging in China. Policy stimulus and momentum in the AI sector are beginning to support a rebound in activity. On the fixed income side, global bond markets are reflecting expectations of stronger growth and inflation. That said, alternative inflation indicators and a firm U.S. dollar point to the possibility of inflation surprising to the downside in the coming months.
Locally, we expect the South African rand to remain under pressure, largely due to rising public debt and persistent political uncertainty.
Nonetheless, a weakening U.S. dollar offers some support to the rand, and we foresee continued dollar softness in the months ahead as reduced US trade activity dampens demand for the currency.
Despite their attractive valuations, South African equities remain vulnerable to shifts in global sentiment. A selective approach is crucial — focusing on companies with the potential to grow earnings in a low-growth domestic environment. Our allocation to South African government bonds remains limited. Instead, we favour exposure to high-quality, secured credit instruments. We are also maintaining a moderate cash position, providing us with the flexibility to capitalize on potential opportunities arising from future market dislocations.
Discover more insights in our blogs
Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by an external contributor as general market commentary and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice