The correction in global equities that started in February intensified severely early April, as the S&P 500 declined 20% from its peak in February, before bouncing back mid-April. At the end of April, EU equities remained the YTD outperformer amongst DM indices. D. Trump marked his first 100 days in office with the weakest US stock market performance since R. Nixon. Tariffs announced on April 2, coined as Liberation Day, triggered a period of extreme market stress last experienced during the Covid crisis. Also, Trump threatened to fire the Fed’s chairman, urging an immediate rate cut to counter the negative effect of tariffs on economic activity. This shock to the US economy and to the Fed’s independence caused an unusually dangerous episode of simultaneous US equity weakness, higher US Treasury yields and weaker USD, ultimately forcing D. Trump to postpone reciprocal tariffs to all countries for 90 days, except China. Also, to stabilize the USD and US Treasuries, Trump made an explicit statement that he had no intention of removing the Fed Chair. These reversals sparked a much welcome technical rebound in global equities, further boosted by strong earnings from US mega-caps.

Looking ahead, US recession risk hinges on potential US trade deals with Japan, Korea and India offering some hopes of tariffs de-escalation, while negotiations with China look more pedestrian. In the meantime, the 10% universal tariffs shock will work its way through the US economy. Survey data for April are unambiguously dire, with consumers' expectations and manufacturing new orders and investment intentions all plunging. As inflation will surge in the short term, it looks unlikely that the Fed prioritizes growth and employment by cutting rates preemptively in May. Monetary support should be effective in H2. The recovery in equity indices seems to be near its peak, as headwinds will intensify in the coming months. However, equity markets should not revisit their early April low.

The Fund was down -0.4% (A, USD) in April, but maintained a positive YTD gain. The significant spike in equity volatility early April triggered few portfolio adjustments to contain the Fund’s sensitivity to equity markets, realizing some mark-to-market losses. Since mid-April, the equity market rebound restored the downside protection while the Fund was fully invested, with the earliest maturity of income notes in June. As of 30/04, the Fund’s running yield was at +10.9% p.a. (USD, gross) with +14.9% downside protection of the income notes allocation and 3.7-month average maturity.