Monthly Report April 2025

Dear investors

Market development in April 2025

Trump's announcement of new far-reaching customs measures ‘for countries around the world’ weighed heavily on the markets at the beginning of the month. The announcement of a 90-day customs pause one week later led to a broad recovery. The Swiss stock market as measured by the SPI fell by 1.9% over the course of the month and the S&P 500 by 0.7% (in USD). The DAX (in EUR), the global equity index MSCI World and the emerging markets index MSCI Emerging Markets (both in USD) even gained 1.5%, 0.9% and 1.3% respectively. As new trade barriers are slowing down the economy, long-term interest rates have fallen. Due to the additional inflationary pressure resulting from higher tariffs and increased political uncertainty, the fall in interest rates was weakest in the USA. While the price of gold continued to rise by 5.3%, oil prices fell significantly by 15.6% (both in USD) due to the gloomier economic outlook.

New tariff regime on US imports as a negative factor

On 2 April, President Trump unveiled the US's new tariff policy and caused alarm on the markets with so-called ‘reciprocal tariffs’ of up to 50% for individual countries. When determining the new US tariffs, the actual tariffs of the respective trading partners were not taken into account, but a country's trade surplus was compared with its total exports to the US. In the case of Switzerland, the trade surplus of 38.5 billion is divided by the total goods exports to the USA of 63.4 billion, resulting in a value of just under 61%, from which the US administration derives a reciprocal tariff of 31%. This approach penalises all export-oriented countries with extremely high tariffs. Prior to the actual introduction of these new tariffs, Trump has ordered a 90-day tariff pause, which is to be used for negotiations with the individual countries. In the meantime, a universal tariff of 10% applies to the vast majority of exports to the USA. Because China has taken measures against the new customs regime, this pause does not apply to Chinese exports. On the contrary, tariffs on goods from China have been increased to 145%.

An import duty has the same effect as a tax. Companies importing goods into the USA will have to bear the additional costs and, if possible, will pass on a significant proportion of these costs to consumers in order to protect their margins. As a result, prices will rise and inflationary pressure will increase if the tariffs are introduced and remain in place. Higher prices are expected to lead to an overall decline in sales volumes and weaker economic growth. US companies and foreign companies that produce in the USA for the USA will benefit from such a tariff regime. Foreign companies without a production site in the USA and US companies with a large proportion of production abroad or a high proportion of imported goods will be among the losers.

Fund and mandate performance

In an initial reaction to the escalation in the trade dispute, all equity markets came under heavy pressure in the first few days of April. A recovery movement was initiated with the announced tariff pause and the market has begun to assess the potential impact on individual companies in a more differentiated manner. Our detailed analysis of the impact of possible tariffs has shown that over 90% of our portfolio companies are not or only slightly affected by possible US tariffs because they either do not do any business in the US, produce products locally for the US market or have a high level of pricing power. Accordingly, all format equity funds outperformed their benchmarks in April. The performance of the funds and mandates since the beginning of the year can be viewed via the link below.

Outlook

Investors will be closely monitoring further developments and possible negotiation outcomes in the trade dispute. They will also be on the lookout for signs of a significant slowdown in the global economy. For this reason, sentiment is likely to remain tense in the coming weeks.

Best regards
Matthias Hug and Markus Lackner

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