What happened in the markets last month
President Donald Trump's sweeping global tariff plan has triggered financial market chaos, recession fears, and rising geopolitical tensions. A baseline 10% tariff on all U.S. imports took effect, with much steeper duties (up to 145%) targeting key trading partners such as China, the EU, Japan, and others. China retaliated with up to 125% tariffs on U.S. goods. The resulting shock led to sharp selloffs in global equities, a plunge and subsequent rebound in U.S. Treasury yields, a spike in the VIX above 60, a collapse of the U.S. dollar against most major currencies, and record highs in gold prices while other commodities like copper and oil crashed.
Economic data weakened and investor confidence collapsed. The S&P 500 suffered its worst drop since the pandemic, while U.S. small caps entered a bear market. Inflation pressures from tariffs - especially on autos and electronics - complicate Fed policy, with markets now pricing multiple rate cuts. Despite the turmoil, Trump defended the tariffs as necessary to rebalance trade and said reductions were possible if countries offer "phenomenal" deals. After a severe market backlash, he paused some tariff hikes for 90 days, triggering a temporary relief rally. Yet volatility persists as negotiations with China, the EU, and others remain unresolved.
Foreign investors significantly reduced their holdings of assets in the United States, raising concerns about “Sell America” flows. Trump further rattled markets by criticizing the Fed and hinting at its independence being conditional on rate cuts. Later in the month, though, he softened his tone, suggesting openness to compromise on tariffs and affirming he would not fire Fed Chair Powell - helping slightly stabilize investor sentiment.
In Europe, the ECB cut interest rates to support the economy, while UK bond yields hit the highest levels since 1998. Growth forecasts were downgraded due to tariffs, economic institutes for example slashed the 2025 growth forecast for Germany from 0.8% to just 0.1%. Tariffs, especially from the U.S., are projected to cut German growth by 0.9%. Despite forming a new coalition government led by Friedrich Merz and the SPD, economic sentiment remains low, with April’s ZEW investor expectations at -14.0 and IFO business confidence also weak. Political uncertainty may increase as the far-right AfD leads in polls, and voter trust in mainstream parties declines. Meanwhile, France faces fiscal challenges, needing 40 billion Euros in savings to meet its deficit target by 2026, and President Macron considers snap elections.
China's economy showed strong Q1 performance, with GDP growing 5.4% and exports surging in March, but the momentum is threatened by escalating trade tensions. Despite a temporary boost from front-loaded trade and stimulus, China faces rising economic strain, with factory activity contracting and policymakers planning further support measures.
What happened in the fund in the last month
The quarterly earnings season has begun, and most companies noted that it is still too early to see or estimate the direct impact of Trump’s ‘Liberation Day.’ While markets crashed, first-quarter earnings overall appeared solid. Among the companies reporting strong sales growth were Adyen (+22% year-over-year), ASML (+45%), GTT (+32%), Microsoft (+15%), SAP (+12.5%), and VAT Group (+39%). The luxury sector remains mixed: some brands continue to show high desirability - Hermès, for instance, reported 8.5% sales growth - while others, such as Kering’s Gucci, saw sales fall by over 20%. LVMH’s Fashion & Leather Goods division also posted lower sales compared to Q1 last year.
ASML
ASML’s Q1 results highlighted the increasing short-termism in stock markets. On the day of the earnings release, the company’s share price fell more than 5%, primarily due to lower-than-expected order intake. While analysts had forecast bookings of €4.8 billion, ASML reported €3.9 billion. Market participants seemed to overlook that in the previous quarter (Q4 of last year), ASML reported exceptional bookings of €7.1 billion - far exceeding the €3.5 billion analysts had expected at the time.
More importantly, the company reaffirmed its full-year outlook, noting that the lower end of the guidance is already largely secured, thanks to strong visibility. ASML released its results shortly after the onset of the recent tariff turmoil. However, during the conference call, management emphasized that clients continue to follow multi-year technology roadmaps, which remain (so far) unchanged. That said, like many other reporting companies, ASML acknowledged rising uncertainty and deteriorating visibility.
Another direct effect of the market turmoil became evident when ASM International and Schneider Electric reported results at the end of the month. Due to the sharp depreciation of the US dollar, companies with significant exposure to North America are experiencing adverse currency effects, which may prompt downward revisions to their outlooks. Schneider, for example, now expects its adjusted EBITA margin to fall within a range of 18.7% to 19.0%, compared to its previous guidance of 19.2% to 19.5%. Importantly, underlying business performance (in constant currencies) has remained fully in line with prior expectations. In the case of ASM International, approximately 80% of its revenues and the majority of its cost base are US dollar-denominated, while its financial reporting is in euros. Despite the better-than-expected underlying business performance, some analysts have therefore reduced their earnings estimates for this year by more than 10%.
Outlook
Global economic uncertainty was already elevated before 'Liberation Day' and has only increased since. When globally active companies speak with investors, two of the most frequently asked questions are: “Have you seen any pre-buying ahead of the tariff announcement?” and, perhaps more importantly, “Have you observed any changes in your business or customer behaviour since the announcement?” In my conversations with companies, the typical responses were “no,” along with the observation that “uncertainty has increased massively and visibility is low.” That said, many companies noted they have prepared for multiple scenarios, and some may be able to partially or even fully offset higher costs through price increases.
At the end of April, companies like Alphabet and Microsoft reaffirmed their substantial spending plans for the year, while Meta even raised its capex outlook - indicating that, for now, there is no expected slowdown in artificial intelligence investments. In today’s rapidly evolving environment, companies must remain as lean and flexible as ever. In this context, Emirates Airlines, for example, recently announced that, thanks to AI, it reduced its time to hire a candidate from 60 days to nearly zero. This led to significant savings in recruitment costs and reclaimed 1,100 days of recruiter time. Mastercard also reported that AI enabled it to detect 40% more fraud attempts in Q1 compared to the same period in 2024.
Predicting the future is difficult, and no one can say for certain whether the announced tariffs - the highest in a century - will actually be implemented or whether new trade agreements between the United States and other countries might be reached. This extreme uncertainty has been reflected in the volatility index (VIX), which spiked above 50 - levels not seen since the COVID-19 pandemic. While history does not repeat itself exactly, it is worth noting that market returns following such spikes have historically been strong. According to a study by Creative Planning, the VIX has risen above 50 on 74 occasions since 1990. In every instance, the S&P 500 traded higher in the following years, with an average gain of 35% after one year and 53% after two years.
Written on 13 May 2025
On the day of writing this article, MW GESTION ACTIONS EUROPE holds the following quoted securities: :
- Adyen for 1.9% of its outstandings
- ASML International for 4.4% of its outstandings
- ASML for 5,8% of its outstandings
- GTT for 3,7% of its outstandings
- Hermes for 3,6% of its outstandings
- Microsoft for 3,8% of its outstandings
- Schneider for 3,8% of its outstandings
- SAP for 5.4% of its outstandings
- VAT Group for 1.3% of its outstandings
Communication-Marketing
The MW Actions Europe fund is a compartment of the Luxembourg SICAV MW ASSET MANAGEMENT. You should contact the fund management company MW GESTION or your financial advisor for more information.Past performance is not a reliable indication of future performance. Past performance is no guarantee of future performance.
The content does not constitute a recommendation, an offer to buy, a proposal to sell or an invitation to invest.
Further information is available on the company's website: www.mwgestion.com, in French, English and Italian.