The week in markets: Stocks rise but uncertainty lingers

Risk assets bounced back this week following increased hopes of a further de-escalation in the trade war and an easing in fears surrounding the independence of the US Federal Reserve.

Published: 24 Apr 2025

 

 

Analysis by: Amber Gleeson, Investment Specialist, Aviva Investors

Market Update

  • As of Friday morning, equity markets have delivered positive returns this week, with the S&P 500 up 3.8 per cent and delivering three consecutive days of gains. These returns were led by tech companies, with the Nasdaq up 5.2 per cent. Emerging markets also enjoyed a strong week, returning 2.5 per cent, meaning global equities appreciated 3.4 per cent.1
  • Markets had a shaky start to the week, after President Trump publicly chastised Federal Reserve (Fed) chair Jerome Powell over his refusal to cut interest rates. This raised concern the president might attempt to oust Powell and throw the Fed’s independence into question. Gold soared past a record high of $3,500 per troy ounce in a flight to safety, while the US dollar and US stock futures sank. This had somewhat cooled by the time markets closed on Tuesday, after President Trump clarified he had “no intention” of firing Powell, bringing an instant relief rally to markets.
  • President Trump also made another apparent U-Turn. A day after meeting with executives from Walmart, Home Depot and Target, he signalled tariffs on China, which currently stand at 145 per cent on most goods, could be lowered. The US president later declared the US was talking with China on trade, although officials from Beijing denied these claims.
  • The IMF downgraded its global growth forecast, predicting 2.8 per cent growth in 2025 and three per cent for 2026, citing the uncertainty brought about by the escalating trade war. However, these forecasts only considered information as of April 4, thus not including President Trump’s pause on both reciprocal tariffs and later additional tariffs on China.
  • Major companies also reported earnings this week. Tesla announced a poor quarter on Tuesday, with revenue from making vehicles falling 20 per cent year-on-year and non-GAAP earnings per share falling 41 per cent, to $0.27, which was almost half what analysts were expecting. Alphabet announced earnings on Thursday, beating earnings per share estimates by 40 per cent and growing 47 per cent from last year. This helped boost the so-called “Magnificent Seven” stocks (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla).2

Outlook

  • Despite the gains this week, investor sentiment remains cautious due to the uncertainty on tariff and tax policy.
  • Wall Street analysts have begun paring back their corporate profit outlooks. Citigroup’s US Earnings Revisions Index, which measures estimated profit upgrades versus downgrades, is approaching extreme pessimism.
  • We are likely to see ongoing volatility in investment markets pending the arrival of more economic data and – of course – further news on President Trump’s policies.

Our positioning in multi-asset portfolios

  • In portfolios where we have active discretion, we have maintained more defensive positioning, aiming to provide protection for investors in this volatile and uncertain environment.
  • We remain underweight equities. Meanwhile, we have structured our active fixed income positions to be less impacted by rising long-end US bond yields, by having more exposure at the five-year point of the Treasury curve.
  • We continue to monitor the situation to ensure the portfolios remain positioned appropriately. While cautious, we are still looking to add value where we have active discretion.
  • As longer-term investors, it is important to remain calm in these volatile and uncertain times. We continue to be confident that financial markets can provide the growth required by investors to meet their long-term goals.

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References

1.Source of all data in this article: Bloomberg, as of April 25, 2025.

2.The companies mentioned are for illustrative purposes only, not intended to be an investment recommendation.

 

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