April Monthly Market Review
- Anthony Walters
- May 1
- 4 min read
Welcome to our Monthly Market Review for April 2025, where we explore the major economic shifts and market trends shaping investor behaviour. This month, central banks in the UK and Europe cut interest rates to support growth, even as inflation shows signs of re-emerging. U.S. trade tariffs sparked fresh volatility, impacting global sentiment and sector performance. European small caps outperformed, while emerging markets showed mixed results. From policy uncertainty to portfolio resilience, this review provides key insights into the forces driving today’s investment landscape.
Rates cut, but with an eye on inflation
UK and Europe cut interest rates, amid potential for rising inflation
US tariffs spark market volatility
European Small Caps shine as Turkey and China struggles
The Balanced portfolio Index (-0.85%) finished slightly down for the month of April as the potential re-ordering of world trade and rapid changes in US policy continued to cause volatility in markets.
Inflation and Interest Rates.
UK.
The Bank of England has cut interest rates by 0.25%, bringing the base rate down to 4.25%. This decision was influenced by lower-than-expected inflation in March, which stood at 2.60%, down from 2.80% the previous month. However, inflation is projected to rise to around 3.00% in April due to increases in energy and water bills. Despite the anticipated rise in inflation, the Bank of England justified the rate cut as a measure to counteract potential economic slowdown.
U.S. Federal Reserve.
In the United States, the Federal Reserve opted to keep interest rates unchanged in May 2025, maintaining the federal funds rate within the range of 4.25% to 4.50%. This decision was driven by mixed economic signals, including strong employment data and consumer spending, contrasted with a downturn in GDP and declines in business and consumer confidence. Inflation, as measured by the Personal Consumption Expenditures Price Index, slowed to 2.30% in March, but underlying inflation remained higher at above 2.60%. The Fed is closely monitoring the impact of the President's tariffs, which are expected to drive inflation higher as the year progresses.
European Central Bank (ECB).
The Eurozone saw inflation hold steady at 2.20% in April 2025, slightly above the European Central Bank's (ECB) target. Core inflation, which excludes volatile food and energy prices, accelerated to 2.70% from 2.40% in March. The ECB cut all three of its key interest rates by 0.25%, lowering the main refinancing rate to 2.40%, the deposit rate to 2.25%, and the marginal lending facility to 2.65%, as expected. The rise in service prices, driven by Easter timing effects, has bolstered calls for further rate cuts, with economists predicting another cut in June.
Market performance.
In developed markets, it was a mixed month for European equities as four of the top five performers and three of the bottom five performers all came from the continent. Portugal returned almost 5% as the index's major constituents, including EDP SA, Jerónimo Martins SGPS, and Galp Energia SGPS, reported strong quarterly earnings. Meanwhile, Norway fell by 4.47% amid a decline in oil prices, which negatively impacted major Norwegian energy companies such as Equinor and Aker BP.
In emerging markets, Mexico led the way, returning over 9% as it faced no new trade tariffs on “Liberation Day” on 2nd April. At the opposite end of the scale, Turkey fell by over 9% as Turkish companies grappled with political turmoil and the consequential increase in borrowing costs. A plunge in the lira forced the Central Bank of Turkey to deliver an unexpected rate hike in its main interest rates, surprising market expectations that it would hold borrowing costs unchanged.
Sector performance.
At sector level, European Smaller Companies led gains for the month, returning over 3% whilst China/Greater China fell by over 6% amid new trade tariffs imposed by the United States.
Summary.
A month on from the previous update and the path forwards remains unclear. Trade tariff policy appears to change frequently, meaning markets lack the certainty they need to progress, whilst one positive is the recent announcement of a US-UK trade deal. The UK has also recently signed a trade deal with India, with the aim of bolstering economic momentum.
One thing is certain: volatility has reduced considerably. As seen in the chart below, the index peaked on 8th April and has since declined by approximately 34%, at the time of writing.
Sources.
The ‘Balanced portfolio benchmark’ is the UT Mixed Investment 20-60% Shares Sector.
MoneyWeek: "Bank of England cuts UK interest rates to 4.25%" by Katie Williams, 8th May 2025.
Forbes Advisor UK: "Interest Rates & Inflation Updates" by Kevin Pratt, 8th May 2025.
Yahoo Finance: "Bank of England's Bailey says inflation is slowing, 2025 jump will not last,” 8th May 2025.
Reuters: "Fed Likely to Leave Rates Unchanged as It Hunts for Clarity on the Economy" by Howard Schneider, 7th May 2025.
U.S. News: "Fed Holds Rates Steady, Warns of Higher Unemployment and Inflation" by Tim Smart, 7th May 2025.
Yahoo Finance: "Federal Reserve holds interest rates steady for May 2025: What to know" by Rob Wile, 7th May 2025.
Reuters: "Euro Zone Inflation Holds Steady in April, Service Prices Surge" by Balazs Koranyi, 7th May 2025.
CNBC: "Euro zone inflation, April 2025" by Sophie Kiderlin, 2nd May 2025.
Yahoo Finance: "Eurozone inflation holds above expectations in April," 2nd May 2025.
