May 2025 monthly investment news

Investors responded to the tariffs by selling equities, fearing that a tariff war could lead to higher inflation and slower global growth. China’s announcement of reciprocal tariffs further heightened concerns. The situation escalated as both the US and China repeatedly increased their tariffs.

As the month progressed, bond markets saw fluctuating yields. A 90-day pause was announced, which slightly eased the extreme volatility. Commodity markets also declined over the month, except for Gold, which soared to a record high. However, investors are likely to remain cautious as trade uncertainty persists.

Market activity

During April we made several active allocation decisions. At the start of the month, we neutralised our equity exposure in the Active Asset Allocation fund and our other multi-asset and managed funds via physical US equity sales. The proceeds at the time were invested in shorter date bonds.

In the middle of April, we lowered our fixed income weighting in AAA and the Prisma funds, bringing us to a roughly neutral position, we did this by reducing the medium duration government bonds weighting.

Following the move back down in yields during the month, we reduced our medium and short-term bond exposure. Additionally, at the end of the month we added to short term credit out of short-term government bonds.

Equity markets

Global equity markets faced a sharp decline at the beginning of April but managed to recover some losses by month-end, though they still finished lower overall. US President Trump announced higher-than-expected trade tariffs against trading partners, causing initial market distress.

However, when Trump later softened his stance and announced a 90-day pause in implementing reciprocal tariffs, equity markets reacted positively. They recorded large gains on the day of this announcement and gradually recovered some previous losses throughout April.

Despite this recovery, all MSCI sectors ended the month in negative territory, with the Energy sector hit hardest, with returns of -15.2%. Whilst all equity markets were volatile over April, European equity markets continue to outperform their US peers in 2025.

Bonds and interest rates

Bond markets experienced significant volatility in April. The 10-year US bond yield initially dropped below 4.0% following the Liberation Day announcement but then surged to 4.5%. This prompted the US President to declare a 90-day cooling-off period to facilitate trade negotiations.

In the eurozone, the ECB reduced rates by 25 basis points, lowering the deposit rate to 2.25%. The disinflationary trend is progressing well in Europe, and the deteriorating growth outlook due to tariffs has increased confidence in the potential for lower interest rates to support the European government bond market.

Commodities and currencies

In April, commodity markets mostly saw declines, except for Gold. Gold benefited from the month’s uncertainty, hitting a record high of $3,423 per troy ounce, as investors sought a safe haven.

Oil prices dropped sharply after OPEC increased supply and concerns emerged about reduced global demand due to potential economic slowdown. Copper, heavily influenced by global growth expectations, fell significantly, ending the month down -9.9% in Euro terms.

The USD weakened substantially throughout April, with the EUR/USD rate reaching as high as 1.152. Uncertainty surrounding US policies has undermined investor confidence in US assets and sparked debates about the US Dollar’s role as the world’s primary reserve currency.