What Just Happened?

Liberation Day finally landed on 2 April. Unsurprisingly, markets reacted negatively. What did surprise me, however, was the Fear and Greed Index, which has moved into Greed territory for the first time since Trump was elected.

It’s fair to say it has been a strange few weeks in markets.

What Has This Meant for Markets?

Some of the stats from April make for interesting reading:

• United States:

The S&P 500 dropped 0.76% in April, bringing its year-to-date decline to 5.31%. The Dow Jones Industrial Average fell 3.17% for the month, now down 4.41% year-to-date.

• Europe:

European markets demonstrated resilience amid the turmoil. The Stoxx Europe 600 index showed less volatility compared to U.S. indices and is up around 4% year-to-date.

• Asia:

Hong Kong's Hang Seng Index was one of the top performers, achieving a 14.68% year-to-date gain as of early May.

For clients invested in strategies with an overweight to the US, it’s clear that this year may not have been particularly favourable so far. However, more broadly diversified portfolios—especially those with allocations to Asia and Europe—may have delivered better outcomes.

This highlights why diversification across regions, not just asset classes, matters so much in a changing world.

Surely the US Will Bounce Back

I would never bet against the US completely—it remains one of the most innovative economies globally. However, the Fear and Greed Index paints an intriguing picture. While headline sentiment shows Greed, under the bonnet, market momentum indicators are still in Extreme Fear territory.

This suggests the "greed" might be short-lived, driven by buyers snapping up what they perceive to be cheap stocks rather than based on underlying economic strength. A reminder that emotion, not just fundamentals, often moves markets in the short term.

(Example: In late 2018, despite strong fundamentals, panic selling drove sharp corrections before a full recovery in early 2019.)

The Next Ten Years Will Match the Next Ten Years

It’s easy to believe that history repeats, but decades rarely follow the same script:

1980s: Japan’s Nikkei 225 Dominates

• Nikkei 225 surged nearly 400%, driven by Japan’s economic boom and asset price bubble.

• S&P 500 gained approximately 227%, supported by economic expansion and the early tech revolution.

• FTSE 100 increased by about 125%, reflecting strong UK growth during the Thatcher years.

1990s: US Tech Boom

• S&P 500 soared over 400%, fuelled by dot-com innovation.

• NASDAQ Composite skyrocketed by more than 800%, as technology stocks led the charge.

• DAX (Germany) rose approximately 300%, helped by the post-reunification boom.

2000s: Emerging Markets Shine

• MSCI Emerging Markets Index gained around 150%, led by Brazil, Russia, India, and China (BRICs).

• Brazil’s Bovespa increased by over 200%, driven by commodity demand.

• S&P 500 saw a modest -10% decline, impacted by the dot-com crash and the 2008 financial crisis.

2010s: US Leadership Reasserted

• S&P 500 climbed approximately 250%, driven by an extended bull market.

• NASDAQ Composite advanced over 400%, led by the FAANG (Facebook, Apple, Amazon, Netflix, Google) stocks.

• Nikkei 225 grew by about 160%, marking a recovery after decades of stagnation.

A Changing Global Landscape

The world is shifting. China’s economy continues to grow faster than that of the US, and it is now less dependent on US demand than it was even a decade ago. While tariffs may have been politically popular, history shows they tend to hurt the end consumer and ultimately slow down growth.

(Example: The Smoot-Hawley Tariff Act of 1930 is widely credited with worsening the Great Depression.)

What matters for investors today is not where the world has been, but where it is going. The coming decade will likely be shaped by:

• The rise of Asia as an economic power bloc

• Increased focus on sustainability and energy transitions

• Growing importance of technology and innovation beyond Silicon Valley

Conclusion: A Roller Coaster Ride

Most investors will be glad to see the back of April. What initially seemed like sheer madness now appears to have calmed slightly. Perhaps there was some logic to weakening the dollar and reducing debt repayment burdens—but the global impact of these moves will likely be felt for a long time to come.

Despite the noise, returns have remained achievable. And it’s worth remembering: decades don’t always repeat, and a well-diversified approach remains the best defence against an unpredictable future.