UK
Volatility hits markets: President Donald Trump’s announcements on trade tariffs absorbed the limelight during April and, in common with the rest of the world, UK markets were volatile, fluctuating in response to daily newsflow from the US. Having plummeted by over 10% between the end of March and 9 April, the FTSE 100 Index ended April only 1% lower, while the FTSE 250 Index – whose constituents tend to be more domestically focused – rose by 2.1% over the month.
Deteriorating outlook: despite a subsequent pause on tariffs, the British Retail Consortium warned that confidence amongst UK businesses and consumers remains fragile against a backdrop of rising global prices, higher employer National Insurance contributions, and an increased National Living Wage. Meanwhile, GfK’s index of consumer confidence showed a sharp deterioration during April. Elsewhere, the Bank of England’s (BoE’s) Financial Policy Committee warned: “Uncertainty has intensified … The probability of adverse events, and the potential severity of their impact, has risen.” The tariff announcements from the US have contributed to a “material increase in the risks to global growth”.
IMF downgrades growth forecast: the UK economy grew by 0.5% during February, boosted by activity in the services sector. UK exports to the US rose by £500 million in February, indicating that UK businesses had increased export activity ahead of the expected introduction of US tariffs. The International Monetary Fund (IMF) downgraded its growth forecast for the UK in 2025 from 1.6% to 1.1%, citing higher gilt yields, weaker private consumption, and higher inflation. The prospect of lower economic growth boosted speculation over the possibility of further cuts to UK interest rates.
Inflation set to pick up? The UK’s annualised inflation of inflation rate eased to 2.6% in March, compared with February’s rate of 2.8%. The IMF raised its 2025 UK inflation forecast by 0.7 percentage points to 3.1%, highlighting the impact of one-off regulated price changes.
Stronger pound set to dampen dividends: dividend payments in 2025 from UK listed companies are expected to rise by 1.8% on an underlying basis, but to remain flat on a headline basis, reflecting a stronger pound and a cooling global economy. According to Computershare’s UK Dividend Monitor, the impact of companies leaving the UK stock exchange is set to mean £5 billion less in dividend payouts this year than would otherwise have been the case.
Global
Trump unveils his tariffs: April began with a bang with ‘Liberation Day’ – US President Donald Trump’s plan to ‘liberate’ the US from the perceived unfairness of trading arrangements with the rest of the world. He unveiled a swathe of ‘reciprocal’ tariffs on countries around the world, ranging from 10% to 50%. The announcement triggered sharp declines in global markets and was widely criticised. International Monetary Fund (IMF) Managing Director Kristalina Georgieva commented: “Trade policy uncertainty is literally off the charts”.
A volatile April: President Trump subsequently announced a 90-day ‘pause’ on reciprocal tariffs for all countries apart from China and, although markets generally regained some ground from their recent lows, the rest of the month continued to be marked by volatility, exacerbated by a series of tit-for-tat moves between China and the US. The ongoing uncertainty drove the US dollar down and bond yields up; meanwhile, the price of gold hit fresh highs. Over April as a whole, the Dow Jones Industrial Average Index fell by 3.2%, while the Nikkei 225 Index rose by 1.2% and the Dax Index climbed by 1.5%.
Pressure on the Fed: sentiment towards the US was further destabilised by President Trump’s ongoing criticism of Fed Chair Jerome Powell as he continued to urge Chair Powell to cut US interest rates. The IMF warned: “Central banks need to remain credible. And part of that credibility is built upon their central bank independence.”
IMF downgrades US growth forecast: having grown at an annualised rate of 2.4% in the final quarter of 2024, the US economy contracted by 0.3% in the first three months of 2025. Import activity rose sharply as companies sought to get ahead of the President Trump’s anticipated tariffs. The IMF cut its 2025 growth forecast for the US by 0.9 percentage points to 1.8%, citing “greater policy uncertainty, trade tensions, and a softer demand outlook”; tariffs are expected to continue to hamper growth in 2026.
US rate cuts on the horizon? The European Central Bank cut interest rates by 25 basis points in March, reducing its key rate to 2.25%. Policymakers believe that the disinflation process is “well on track” but warned that intensifying trade tensions had caused the growth outlook to deteriorate. Elsewhere, investor sentiment in the US was lifted towards the end of the month by hopes of a summer rate cut.
As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344 or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.