In the words of Deutsche Bank's Henry Allen, "April was an absolutely seismic month in financial markets, as the announcement of US reciprocal tariffs led to a huge global sell-off." Indeed, the initial moves were truly historic in their speed, and straight after the announcement, the S&P 500 posted its 5th-worst two-day decline since WWII. That turmoil quickly spread to the bond market, where the 30yr Treasury yield briefly surpassed 5% intraday amid a global blow up of basis trades. Meanwhile, the VIX index closed above 50, something we’ve only seen this century at the height of the GFC and during the initial Covid-19 turmoil. However, calm began to return to markets after President Trump announced a 90-day extension to the reciprocal tariffs, and US officials began to negotiate deals with other countries. So that meant market stress began to ease, and the aggregate performance in April wasn’t as bad as the headlines might suggest, with the S&P 500 only down -0.7% in total return terms.
So if were lucky enough to just look at the monthly equity returns in local currency terms, you could be forgiven for thinking it was boring, uneventful month. But in reality it was historic, and it included the best day for the S&P 500 since October 2008, as well as its worst day since March 2020. Otherwise, we saw the biggest weekly widening in the 10yr UST-bund spread in data back to German reunification in 1990. The dollar index has now seen its worst two-month performance since June 2002. And gold prices have seen their strongest start to a year since 2006.
Month in Review - The high-level macro overview
