Monthly Market Outlook: April 2018

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After February ended a run of 11 consecutive months of positive, less volatile returns for equities, March saw risk assets continue to suffer as US bond yields peaked near 3% and fears of a global trade war came closer to fruition, with President Trump placing tariffs on Chinese imports of steel and aluminium and China responding in kind with tariffs on a range of products from soya beans to whiskey. At the time of writing there have been further ‘tit-for-tat’ tariffs added. Further US technology stocks, the performance of which have largely driven the bull market in recent years, saw big losses with Facebook forced to defend its conduct in the US and UK with allegations that Cambridge Analytica were able to harvest Facebook data in order to sway the US Presidential election and the Brexit vote. The question now is whether the recent sell-off is a blip and these companies can maintain the confidence of their users and continue the huge expansions of the past few years, or whether there is a backlash against these data gathering companies from both the public and regulators that significantly dent their profits. As a result, global equities shed 2.2% for the month in USD terms. US stocks faced the largest losses, down 4.2% in Sterling terms (-2.5% in USD) as although tech stocks performed poorly, financials fell the most, suffering from a flattening yield curve. Sterling rallied vs major currencies, up 1.9% vs USD, 0.8% vs EUR and 1.5% vs JPY. As a result UK stock were the strongest performing in Sterling terms, down 2.0%. US 10 year yields rose as high as 2.96% during the month, however closed the month at 2.74% as investors sought safety. With the Federal Reserve increasing interest rates for the sixth time since the GFC and hawkish comments from the Bank of England, both the US and UK saw short end yields rise and long end yields fall, resulting in flattening yield curves. In USD terms Gold gained 0.5%, Oil rallied 5.4%, but metals fell 4.0%.