The April 2025 market saw renewed volatility, with global trade tensions and inflation shifts impacting investor sentiment. This update explores key economic trends and outlines what they may mean for investment portfolios moving forward.
Global markets
April delivered significant fluctuations across global equity markets, largely driven by renewed tariff announcements from U.S. President Donald Trump. Equity markets corrected sharply before rebounding on news of delays and concessions.
US economy under pressure
The reintroduction of tariffs between the U.S. and China is expected to disrupt supply chains and reduce margins as U.S. companies absorb some of the additional costs. With GDP growth already in negative territory (-0.3% for Q1 2025), there are growing concerns of an extended U.S. recession.
While inflation continues to decline in much of the world, U.S. inflation may spike short term due to tariffs, complicating the Federal Reserve’s rate-cutting intentions. The interplay between inflation and falling demand is likely to create a challenging monetary environment.
Global economic trends
- Global inflation is easing
- China is expected to increase fiscal and monetary stimulus
- The U.S. Federal Reserve is likely to cut rates in late 2025, despite near-term inflation risks
Australian economy
Closer to home, the Australian economy saw encouraging signs. Core inflation for Q1 2025 dropped to 2.9%, placing it squarely within the RBA’s target band of 2.0–3.0%. This paves the way for possible interest rate cuts starting in May, with markets forecasting a year-end cash rate of 3.0% (down from 4.10%).
Policy and trade outlook
- Fiscal policy remains supportive with Labor re-elected federally
- Income tax cuts of $17 billion expected over FY26–FY27
- Minimal direct impact from U.S. tariffs due to low export exposure (5%)
- Australia may benefit as an alternative supplier of critical minerals to Europe and the U.S.
Outlook
The global economic outlook remains mixed. While falling inflation and dovish central banks are positive signals, U.S. trade policy and isolationist rhetoric are creating uncertainty. Tariffs may trigger a new wave of supply chain challenges — without the stimulus safety nets seen during the COVID era.
Until policy becomes clearer, we anticipate continued volatility in U.S. equities, bonds, and the USD. Our current preference is to tilt portfolios away from U.S.-centric exposure and toward opportunities in Europe, Asia, and Australia. We remain cautious, but not bearish, as market direction hinges on the longevity and scale of new tariffs.
Key investment risks
- U.S. trade policy disrupting global supply chains
- Renewed inflation pressure
- China’s economic performance underwhelms
- Geopolitical tensions or climate-related events disrupt global markets
Upcoming key events
- Australian bank reporting season – May 2025
- U.S. Federal Reserve meeting – 7 May 2025
- RBA interest rate decision – 20 May 2025
For personalised investment advice tailored to your goals, contact LDB’s wealth management specialists. Our experienced team can help you navigate market changes and make informed financial decisions.
