Market overview: Huge market turmoil

The trade war instigated by the US government led to huge price gains on the bond markets to begin with, only for most of these gains to be lost again. However, prices of long-term US government bonds are now back near the previous month’s level in the USA, and slightly above the previous month’s level in Europe. 

Indexed performance of government bonds in local currency

100 = 01.01.2025

At the end of March, against the backdrop of the promised “Liberation Day”, bonds were already showing signs of nervousness on the market, causing government bonds to rise significantly in value. But the tide turned again shortly afterwards. Within a few days, there was a huge increase in long-term yields to maturity on US government bonds, which almost returned to their level at the beginning of March. This increase was likely due to the prospect of further escalation of the tariff war with China and will probably have further increased investor scepticism towards the USA, while fuelling concerns about persistently high inflation. With the recent unexpected pause in reciprocal tariffs against numerous countries, the situation has now calmed somewhat, with the rise in government bonds month-on-month limited to Europe and Switzerland.

Trend in 10-year yields to maturity

In percent

Long-term capital market interest rates have been on a rollercoaster ride, particularly in the USA. One month ago, 10-year yields to maturity on US government bond were still at around 4.3 percent, before falling briefly to below 4.0 percent when the trade war broke out and then returning to 4.3 percent. But while long-term interest rates in Europe have also experienced ups and downs, they are currently still below the previous month’s level, in particular in Switzerland. The pause in tariffs seems to have calmed the anxiety on the bond market for the time being. 

Credit spreads on corporate bonds

In percentage points

Despite the temporary suspension of retaliatory tariffs, the effects of the trade war also left their mark on the corporate bond market. Although reduced, the tariff measures are fuelling legitimate fears of recession in the US economy, which, in turn, are likely to have had an impact on the corporate bond market. Spreads on corporate bonds and in particular on US corporate bonds, initially rose sharply. However, credit spreads remain below the levels typically seen in times of recession.

The announcement and subsequent temporary suspension of trade tariffs led to huge fluctuations on the equity markets, with Europe’s stock markets currently looking somewhat subdued following their dynamic start to the year.

Indexed stock market performance in Swiss francs

100 = 01.01.2025

The stock markets last month were very much dominated by the trade war initiated by Trump. The tariffs have significantly clouded the outlook for future global economic performance. Stock markets around the world plummeted by 10 to 20 percent within days of the announcement of trade restrictions.  US stock markets suffered the biggest losses, at times falling 20 percent below their February high. Following strong performance at the beginning of the year, the Swiss stock market traded well below its year-opening level. Trump’s announcement of a pause in retaliatory tariffs for numerous countries triggered skyrocketing prices around the world, allowing US and European markets to recoup some of their losses.  

Momentum of individual markets

In percent

The heavy price losses on global stock markets also had an impact on momentum. Whereas European markets were still in euphoric mood last month following the announcement of new economic stimulus packages, their momentum this month also veered clearly into negative territory. The USA was particularly hard hit, as were countries like Taiwan, which are heavily dependent on trade with the USA. Momentum also shifted sharply on the Chinese market, which has recently seen only a slight countermovement. This is likely because rather than suspending the retaliatory tariffs against China in response to countermeasures, the USA actually increased them to 145 percent. 

Price/earnings ratio

The price losses on equity markets are also reflected in the performance of price/earnings ratios (P/E ratios). Price/earnings ratios have fallen significantly worldwide, with the most pronounced movements seen on US and European stock indices. 

Swiss real estate funds also lost value this month and are now below their level seen at the beginning of the year.  

Indexed performance of Swiss real estate funds

100 = 01.01.2025

Swiss real estate funds were initially less affected this month by financial markets that were otherwise very volatile. Nevertheless, exchange-listed funds have recently lost significantly in value and are now down over the year as a whole. The decline of almost 30 basis points in capital market interest rates in Switzerland is likely to have helped to maintain robust demand for real estate funds and limit losses compared to the stock markets.

Premium on Swiss real estate funds and 10-year yields to maturity

In percent

The negative performance of exchange-listed Swiss real estate funds led to a slight decrease in the premium that investors usually have to pay on the stock exchange versus the actual net asset value (NAV) of properties. Uncertainty on the global financial markets is likely to have been a key driver of this development, probably supported by the decline in Swiss capital market interest rates. Premiums remain above the historical average.

Vacancy rate and real estate prices

100 = January 2000 (left) and in percent (right)

Real estate prices have lost some of their momentum in recent months. Both single-family homes and rental apartments have seen a slight decline in prices, with only owner-occupied apartments recording a slight increase. A key factor in the subdued price performance overall is likely to have been the significant increase in capital market interest rates at the beginning of the year. Despite this downturn, the current price level remains high, supported by tight supply that is reflected in a very low vacancy rate.

Currencies

The global trade war led to a weaker US dollar this month. Conversely, the Swiss franc, which is seen as a safe haven, was in demand and made gains against the US dollar and the Japanese yen.

Source: Allfunds Tech Solutions

The trade war dominated events on the world’s financial markets. The prevailing uncertainty was also reflected in currencies, where demand for safe havens remained robust this month. The Swiss franc gained 1.5 percent against the euro and almost 3 percent against the US dollar, taking the Swiss franc to its highest level against the euro and the US dollar since the beginning of the year.

^{Source: Allfunds Tech Solutions, Coin Metrics Inc}

Gold

Although the gold price measured in Swiss francs fluctuated last month, it again temporarily reached a new high.

Indexed performance of gold in Swiss francs

100 = 01.01.2025

The precious metal established itself as a safe haven this month despite fluctuations. The gold price hit new record highs in April, despite temporary setbacks. Nevertheless, with an annual return of over 10 percent, gold remains strong and is now providing a significantly higher return than the stock markets.