Difficulty
The war waged by the United States and Israel against Iran had kept investors on edge for little over a month. Toward the end of March and into the beginning of April, however, driven largely by statements from US President Trump, hopes began to emerge of an end to the conflict and a resumption of traffic through the Strait of Hormuz.
On April 8th, President Trump announced a suspension of attacks on Iran for two weeks, followed by a further extension of the ceasefire. Consequently, technology stocks, which had previously fallen the most sharply, were the biggest beneficiaries.
Corporate earnings also played a major role in the market recovery. Companies in the S&P 500 are expected to report 27% year-on-year earnings growth for the first quarter, an exceptionally fast pace by historical standards. But it is not only US companies that are thriving. South Korean chipmaker SK Hynix, for example, reported a fivefold year-on-year increase in profit in the first quarter.
Strong profitability was reflected in the performance of the major US stock indices. Some recorded their best months in six years. The large-cap S&P 500 gained 10.4%, its best monthly result since November 2020. The Nasdaq Composite, which is more technology-weighted, surged as much as 15.3%, its best since April 2020.
Our investors also felt the strong growth, despite a 1.3% decline of the dollar against the euro. Most of our positions are held in dollars, when the dollar weakens against the euro, this represents a drag for euro-based investors, and conversely when it strengthens.
The major European indices also performed well. Europe, as a continent with limited energy resources, bore the consequences of the Middle East war, namely the surge in energy prices, considerably more heavily than the US. At the same time, the major European indices are not as heavily concentrated in technology as their American counterparts, while technology was once again among the most profitable sectors this month.
Modest European gains were further supported by the outcome of the Hungarian elections, in which the pro-European party Tisza, led by Péter Magyar, gained a supermajority, raising hopes for more unified and decisive decision-making within the EU.
The pan-European Stoxx 600 gained 4.8%, the French CAC 40 rose 3.8%, the German DAX advanced 7.1%, and the British FTSE 100 added 2.0%.
In East Asia, the American scenario largely repeated itself. Japan and South Korea in particular, as strongly technology-oriented economies, produced significant gains. Japan’s exports grew for seven consecutive months, which fed through into strong performance.
The figurative “winners” of the month can once again be considered Japan’s Nikkei 225, which gained 16.1%, and South Korea’s KOSPI, which closed April with a stunning gain of 30.6%.
There is an increasingly well-worn saying in the markets: “Trump always chickens out”. April is yet another example of that.
Humanity as a species has a natural drive to innovate and improve its standard of living. By investing, you gain a share of the profits generated by these efforts. That is why, from a long-term perspective, every crisis and downturn has so far been overcome.
In our relevant currency markets, the euro depreciated against the Czech koruna by 0.69%, sharply declined against the Hungarian forint by 5.19%, and weakened against the Polish zloty by 0.67%.
The best result among the ETFs included in our portfolios was posted by the fund tracking emerging market equities, which returned 12.75%. The fund tracking developed market government bonds was the only one to finish with a slight decline, falling 0.21%.
Among our Investing in ETFs strategies, the best performer was the 100% equity portfolio, which gained 8.9%. The smallest gain was recorded by the 100% bond strategy, at 0.16%. The Wallet returned 0.31% and Smart Deposit improved by 0.09%.
April’s developments once again remind us of a few fundamental truths:
- Downturns are a natural part of markets and there is no need to panic-sell during them. Learn how to stay calm during a market downturn in our latest blog post.
- Broad diversification allows you to capture the winners, who can emerge from anywhere.
- If humanity continues to innovate and improve, markets will continue to grow from a long-term perspective.
