Noteworthy Developments
Global equities, as represented by the MSCI ACWI Index, appreciated by 0.9% during April. However, equities and bonds experienced massive intra-month volatility following President Trump’s Liberation Day tariff announcement on April 2nd and subsequent modifications of tariff policy over the month.
Global Equities
Global equities appreciated by 0.9%, with US large-cap equities (S&P 500) down 0.7%, while international developed (+4.6%) and emerging market equities (+1.3%) performed much better in USD terms.
The S&P 500 initially tumbled by 15% over just three trading days following President Trump’s April 2nd Liberation Day tariff announcement, which would have significantly raised tariffs across most countries to between 10% and 45% effective rates and increased the overall US tariff rate from 2.5% to over 25.0%. The magnitude of the proposed tariff increases was much higher than anticipated. In addition to the swift S&P
500 decline, US Treasury bond yields exhibited highly unusual behavior with 10-year US Treasury bond yields initially declining as expected, but then rapidly climbing by 70bps in less than a week, setting off concerns about financial market stability.
The Trump administration quickly rolled back the massively elevated tariff rates for most countries to a more palatable 10%, while escalating tariffs with China (ultimately these rates reached 145% with China retaliating and raising tariffs on US imports to 125%). The S&P 500 rallied significantly from the April 8th lows with strong subsequent performance driven by a) rollback of initial draconian tariffs, b) resilient economic data especially with regards to the labor market, and c) better-than-expected corporate earnings especially from the large-cap bellwether technology companies. On a relative basis, international developed (+4.6%) and emerging market (+1.3%) equities performed much better in USD terms. This relative outperformance was driven by currency translation as international equities were modestly down in local currency terms. The USD weakened substantially by 4% during the month given the tariff uncertainty.
Globally, growth stocks (+3.0%) significantly outperformed value stocks (-1.2%). Consumer staples, industrials, and technology sectors (+3.8%, +2.7%, and +2.0%) performed best while energy and health care (-10.1%, and -1.7%) performed worst. The Magnificent Seven ended flat for the month, erasing substantial declines after rallying strongly following better-than-expected earnings reports.
Fixed Income
The US Aggregate Bond Index was up 0.4%. At first glance, it appears that bond yields were stable with 10-year US Treasury yields only down 5bps for the month. However, intra-month volatility reached extreme levels as bond yields moved erratically following the April 2nd Liberation Day tariff announcement. US 10-year yields initially declined by 30bps over three days post announcement before rapidly climbing by 70bps over the next three trading sessions. Over the remainder of the month, bond yields steadily declined and ended April at similar levels compared to March month end.
US government bonds were up 0.6% and investment grade corporate bonds were flat. High-yield bonds and leveraged loans were also flat as high coupon yields were offset by widening spreads. Bond spreads moved dramatically intra-month with high yield spreads widening by 110bps from March end through April 8th before falling 70bps through April month end.
Alternatives
The HFRX Global Hedge Fund Index was down 0.4% with mixed performance across strategies. Convertible arbitrage (+1.2%) and credit
strategies (+0.5%) performed best while global macro / trend following hedge funds performed worst at -3.0%.
Manager Comments
Alphadyne: -6.9%
Challenging month with losses driven by both macro directional (largely bets on Japanese rates) and relative value themes (largely US bets) as bond yields fluctuated dramatically throughout the month post the Liberation Day tariff announcements. Given that global macro strategies are often highly levered, extreme volatility in underlying positions such as interest rates can lead to abnormally outsized returns over short time periods.
Apollo Credit Strategies: +1.3%
Outperformed the HFRX hedge fund index (-0.4%) with relative outperformance driven by idiosyncratic long and short credit positions.
USD April Market Commentary
USD April Market Commentary
Noteworthy Developments
Global equities, as represented by the MSCI ACWI Index, appreciated by 0.9% during April. However, equities and bonds experienced massive intra-month volatility following President Trump’s Liberation Day tariff announcement on April 2nd and subsequent modifications of tariff policy over the month.
Global Equities
Global equities appreciated by 0.9%, with US large-cap equities (S&P 500) down 0.7%, while international developed (+4.6%) and emerging market equities (+1.3%) performed much better in USD terms.
The S&P 500 initially tumbled by 15% over just three trading days following President Trump’s April 2nd Liberation Day tariff announcement, which would have significantly raised tariffs across most countries to between 10% and 45% effective rates and increased the overall US tariff rate from 2.5% to over 25.0%. The magnitude of the proposed tariff increases was much higher than anticipated. In addition to the swift S&P
500 decline, US Treasury bond yields exhibited highly unusual behavior with 10-year US Treasury bond yields initially declining as expected, but then rapidly climbing by 70bps in less than a week, setting off concerns about financial market stability.
The Trump administration quickly rolled back the massively elevated tariff rates for most countries to a more palatable 10%, while escalating tariffs with China (ultimately these rates reached 145% with China retaliating and raising tariffs on US imports to 125%). The S&P 500 rallied significantly from the April 8th lows with strong subsequent performance driven by a) rollback of initial draconian tariffs, b) resilient economic data especially with regards to the labor market, and c) better-than-expected corporate earnings especially from the large-cap bellwether technology companies. On a relative basis, international developed (+4.6%) and emerging market (+1.3%) equities performed much better in USD terms. This relative outperformance was driven by currency translation as international equities were modestly down in local currency terms. The USD weakened substantially by 4% during the month given the tariff uncertainty.
Globally, growth stocks (+3.0%) significantly outperformed value stocks (-1.2%). Consumer staples, industrials, and technology sectors (+3.8%, +2.7%, and +2.0%) performed best while energy and health care (-10.1%, and -1.7%) performed worst. The Magnificent Seven ended flat for the month, erasing substantial declines after rallying strongly following better-than-expected earnings reports.
Fixed Income
The US Aggregate Bond Index was up 0.4%. At first glance, it appears that bond yields were stable with 10-year US Treasury yields only down 5bps for the month. However, intra-month volatility reached extreme levels as bond yields moved erratically following the April 2nd Liberation Day tariff announcement. US 10-year yields initially declined by 30bps over three days post announcement before rapidly climbing by 70bps over the next three trading sessions. Over the remainder of the month, bond yields steadily declined and ended April at similar levels compared to March month end.
US government bonds were up 0.6% and investment grade corporate bonds were flat. High-yield bonds and leveraged loans were also flat as high coupon yields were offset by widening spreads. Bond spreads moved dramatically intra-month with high yield spreads widening by 110bps from March end through April 8th before falling 70bps through April month end.
Alternatives
The HFRX Global Hedge Fund Index was down 0.4% with mixed performance across strategies. Convertible arbitrage (+1.2%) and credit
strategies (+0.5%) performed best while global macro / trend following hedge funds performed worst at -3.0%.
Manager Comments
Alphadyne: -6.9%
Challenging month with losses driven by both macro directional (largely bets on Japanese rates) and relative value themes (largely US bets) as bond yields fluctuated dramatically throughout the month post the Liberation Day tariff announcements. Given that global macro strategies are often highly levered, extreme volatility in underlying positions such as interest rates can lead to abnormally outsized returns over short time periods.
Apollo Credit Strategies: +1.3%
Outperformed the HFRX hedge fund index (-0.4%) with relative outperformance driven by idiosyncratic long and short credit positions.
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