Watch Sean Henaghan, our Chief Investment Officer, share what's driving markets right now and why Aurora is maintaining a cautious investment approach.
April proved to be a volatile month for global markets, dominated by shifting US trade policy and geopolitical tension. While these headline risks have led to sharp market swings, we believe maintaining perspective and focusing on fundamentals remain key for long-term investors.
Headline-Driven Volatility Returns
The month began with a surprise escalation in US tariffs, triggering a sharp selloff in equity markets and a spike in market volatility. The VIX, a popular measure of market risk, surged to 60 — the highest level since the pandemic. However, markets rebounded later in the month after the US administration softened its stance, offering a 90-day pause on tariffs for several countries and exempting key sectors from the initial round of duties.
Despite the rebound, uncertainty around the direction of US trade policy remains high and continues to cast a shadow over investor sentiment. While the most punitive outcomes now appear less likely, elevated tariffs are expected to persist and may weigh on corporate investment and global growth. In this environment, flexibility and a long-term perspective are essential.
Macroeconomic Signals Turning Cautious
Economic data in April remained resilient, however pointed to a modest slowdown in momentum. In the US, key business and consumer confidence indicators softened, while purchasing manager surveys indicate weaker activity, particularly in the services sector. European data similarly reflected caution, with PMIs hovering near contractionary levels and consumer sentiment subdued. In New Zealand, the ANZ Business Outlook Index fell sharply to 49.3 — its lowest reading since July 2024 — down from 57.5 the previous month, as global market turbulence weighed on business confidence.
On the policy front, the European Central Bank delivered a 25-basis point rate cut, citing disinflation and slowing growth. Markets are also now pricing in several rate cuts from the US Federal Reserve over the remainder of 2025, despite lingering inflation risks. The Reserve Bank of New Zealand lowered the Official Cash Rate by 25 basis points to 3.5%.
Equity and Bond Market Dynamics
Global equity markets ended the month in slightly positive territory and developed market equities were up 0.9%. However, performance varied widely by region. US equities underperformed global peers, dragged down by weakness in energy and healthcare sectors. Growth stocks outpaced value. New Zealand equities declined by approximately 3% over the month.
Emerging markets displayed relative resilience, supported by strong returns from countries like Mexico and Brazil. Chinese equities also rebounded later in the month as first-quarter GDP exceeded expectations and trade tensions temporarily eased.
Fixed income markets were similarly volatile. US Treasury yields surged early in April, peaking at 4.6% before retreating to 4.2% by month-end. Bond yields in Europe declined, helped by easing inflation pressures and expectations for rate cuts. Credit spreads initially widened amid risk aversion but later retraced much of the move, with high-quality issuers remaining relatively resilient.
Looking Ahead: The Case for Staying Disciplined
While the geopolitical backdrop remains fluid, history shows that markets tend to recover from short-term shocks. We expect ongoing volatility as trade policy evolves and global economies adjust, but also see opportunities emerging beneath the surface.
In this type of environment, we believe staying diversified across regions, asset classes, and investment styles is critical. Aurora Capital’s approach — with its focus on active management, broad diversification, and long-term discipline — is designed to help navigate precisely these kinds of uncertain markets.
We remain committed to managing your investments prudently and to keeping you informed as conditions evolve.
DISCLAIMER
This information is provided in a general nature only and should not be construed as or relied on as financial advice. This is not a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any investment decisions.
Past performance is not a reliable indicator of future performance. The value of your investment may go up and down.