EQUITY MARKETS SNAP BACK FROM THE ABYSS OF UNCERTAINTY
EQUITY MARKETS
Equity markets around the globe rebounded from the heightened uncertainty as the VIX index continued its gradual descent. Trump’s hardline approach did not sit well with markets, as valuations were shaken, leading to increased volatility. As equity risk premiums rose and credit markets grew ever more jittery, Trump and his team were forced to tone down some of their aggressive rhetoric towards trading partners. The concessions made by the Trump administration proved to be a game-changer for markets, as it became increasingly evident that Trump was willing to compromise in order to maintain financial stability. In a sense, markets have come to recognise that there is a threshold of tolerance—if breached, Trump will likely yield. The rollback of various tariffs weakened his stance and, despite the sensationalism, markets have become less reactive to his comments. Ultimately, it appears there is a “Trump put”: if conditions deteriorate, he is expected to align with market sentiment. As trade tensions eased, the VIX index fell from the high 50s to around 18 points, a level considered within normalised ranges.
The strong equity rebound was most evident in sectors that had already been under pressure. The tech-heavy Nasdaq and the “Magnificent 7” staged a robust recovery over the past two weeks, rising approximately 9.6 per cent and 12.8 per cent respectively. Both US and European equities showed a similar turnaround in performance, with the S&P 500 and Euro Stoxx Index both gaining around 5.5 to 6 per cent. The first trade deal Trump publicly announced was with the United Kingdom. Although an agreement in principle has been reached, the details remain critical. Despite the deal, the UK will still be subject to tariffs—an approach that seems to set the tone for other US trading partners. This optimism extended to UK equities, with the domestically focused FTSE 250 outperforming the FTSE 100 by around 3 per cent over the period. However, on a year-to-date basis, the FTSE 250 still trails the FTSE 100 by around 5 percentage points. In Europe, Italy’s FTSE MIB led the way, recouping earlier losses with a 7.5 per cent gain over the past two weeks, pushing its year-to-date performance up to 20 per cent. Italy remains well positioned in the region, as Prime Minister Meloni continues to effectively balance European and US interests.
In corporate news, Shares in retail trading platform eToro jumped on its Nasdaq debut, lifted by easing US-China trade tensions that fuelled renewed interest in IPOs. he stock surged as much as 42.8% intraday before closing up 28.8% at $67, giving eToro a $5.5bn valuation after raising nearly $620mn. The strong listing supported by cornerstone investor, BlackRock, marks a rare bright spot in a volatile IPO market rattled by Trump’s tariff shifts. Western carmakers may face an uncertain future in China as local brands rapidly erode their dominance, particularly in the mid-sized petrol segment, Stellantis has warned. Despite efforts by groups like Volkswagen and Toyota to defend market share, Stellantis says the trend is clear; local players are taking over, and the remaining stronghold won’t last. Burberry plans to cut up to 1,700 jobs; around 18% of its global workforce by 2027 as part of a renewed cost-saving drive to revive the struggling luxury brand. The move, led by new CEO Joshua Schulman, aims to deliver £100mn in annual savings after the company posted a loss and saw revenues drop 17%. Volkswagen’s CFO has warned that its major restructuring is only the beginning, cautioning against complacency as the carmaker faces mounting pressure from EV transitions, falling market share, and rising global competition. Despite early progress, leadership insists much work remains, with profits squeezed by Trump’s tariffs and high European costs undermining its ability to compete with Chinese rivals. UnitedHealth shares plunged nearly 18% to a four-year low after CEO Andrew Witty abruptly stepped down for “personal reasons,” prompting the company to suspend its annual outlook. Former CEO Stephen Hemsley has returned to lead the group amid mounting challenges, including a recent profit downgrade and ongoing leadership turmoil. The U.S. Department of Justice is reportedly conducting a criminal probe into UnitedHealth Group over potential Medicare fraud, according to the Wall Street Journal. UnitedHealth denied receiving any official notice from the DOJ and defended its Medicare Advantage programme, but shares dropped 8% in after-hours trading. Adidas chair Thomas Rabe is facing a shareholder revolt as major German asset managers, including DWS and Allianz GI, plan to vote against his re-election over broken succession promises and concerns about his multiple roles. DWS criticised Rabe for failing to deliver a succession plan after previous warnings, while other investors like Union Investment and Deka have also withdrawn their support.
SECTOR PERFORMANCE
The first two weeks of May saw the information technology sector surge ahead in both the United States and Europe, returning approximately 12 per cent and 10.6 per cent respectively. The consumer discretionary sector was also in recovery mode as trade tensions, particularly with China, began to ease. This sector delivered returns of 8 per cent in the United States and around 7 per cent in Europe.
The worst-performing sector in both regions was healthcare, as Trump remained focused on reducing drug prices. US healthcare was particularly under pressure, not only due to this policy stance but also because of UnitedHealth Group’s management restructuring and the impending Department of Justice case concerning alleged misappropriation of the Medicare programme. These developments contributed to a decline of around 7 per cent in the US healthcare sector, while European healthcare also fell by approximately 1.6 per cent. All defensive sectors in both Europe and the United States came under pressure, failing to sustain any positive momentum. Investors clearly rotated towards cyclical sectors following a period of economic uncertainty over the past six weeks.
CENTRAL BANKING, THE ECONOMY AND GEO-POLITICS
The US and EU have restarted in-depth trade discussions after a prolonged stalemate, exchanging detailed proposals on topics such as levies, digital policy, and cross-border investment. EU officials are urging a measured approach, cautioning against rushed compromises and acknowledging that American duties on key sectors like autos and metals may persist. Tensions rose after US negotiators pushed for written commitments from Brussels, warning of a full reimposition of tariffs if talks stalled. While resisting demands to alter VAT rules and digital standards, the EU signalled willingness to shift away from Chinese supply chains and reinforce trade defences.
Donald Trump has signalled that the US may opt for steeper import duties over broad trade deals, warning partners to expect new tariffs within weeks. Speaking to business leaders abroad, he indicated that upcoming notices would outline the costs of accessing the US market. His administration has already imposed levies on key sectors like autos, metals, and tech, with only limited relief granted to a few allies. Ongoing talks with global partners continue, but the threat of escalating duties adds fresh uncertainty to US trade strategy. Moody’s has downgraded the US credit rating by one level, citing long-term fiscal concerns and a growing debt burden that now mirrors weaker-rated nations. The agency highlighted rising deficits, persistent spending pressures, and sluggish revenue growth as reasons for the shift, marking a rare blow to the US’s financial reputation. This is the last of the three major credit agencies to cut the US from its top-tier rating, reinforcing investor unease over Washington’s budget strategy. While the administration criticised the move, analysts say it underscores the urgent need for serious fiscal reform to preserve confidence in US debt markets. Donald Trump returned from a high-profile Middle East visit to face a wave of domestic headwinds, including a US credit rating downgrade and faltering consumer sentiment. Moody’s cut the nation’s rating over fiscal concerns just as survey data revealed a sharp drop in household confidence driven by inflation worries. Meanwhile, Trump’s signature tax proposal hit resistance in Congress, with budget hawks rejecting the bill amid deficit concerns. The contrast between international dealmaking and rising domestic challenges has cast fresh doubt on the stability of Trump’s economic agenda.
The Federal Reserve plans to reduce its total workforce by roughly 10% over the next few years as part of a broader effort to streamline operations and modernise practices. Chair Jay Powell told staff the move reflects a need to align staffing with the Fed’s mission and responsibilities, emphasising careful use of public funds. The cuts will span across the central bank’s nationwide system, with a voluntary exit scheme offered to eligible retirees at the board level.
For the first time in over two decades, China’s reported holdings of US Treasuries have dropped below those of the UK, signalling a quiet shift in Beijing’s reserve strategy. Chinese-owned Treasuries declined to $765bn by March, while UK-held bonds rose to $779bn, making Britain the second-largest foreign holder after Japan. This change reflects China's ongoing effort to diversify its foreign assets and reduce exposure to US financial instruments. Economists warn that the gradual sell-off is a long-standing signal to Washington that may have gone unheeded.
COMMODITIES
Global commodities rose marginally in value by approximately 0.7 per cent, driven primarily by gains in energy and industrial metals, which increased by around 4 per cent and 2.8 per cent respectively. As trade policies stabilised and tensions eased, market risk premiums declined, pulling precious metal prices lower. Gold traded in negative territory during the first half of May, as investors shifted towards asset classes more closely tied to economic growth, rather than to safe havens like gold. Nevertheless, gold prices remain elevated, holding above $3,000 per ounce.
Cyclical commodities benefitted from the recent risk-on sentiment, with industrial metals recording positive performances; led by copper. Optimism was further fuelled by the US-China trade meeting in Geneva, where both sides agreed to substantially roll back tariffs, boosting expectations for global business activity.
This sentiment also lifted oil prices, despite notable supply-side pressures. Over the past two weeks, the US has engaged in talks with Iran aimed at resolving disputes and curbing the country’s nuclear enrichment. Trump has highlighted the potential for a deal that would see Iran re-entering the global oil market. Should this materialise; alongside OPEC+ production targets and additional US exports; it would add significant downward pressure on oil prices.
CURRENCIES
The swift reversal in United States trade policy led investors to regain confidence in the greenback, resulting in a marginal strengthening of the US dollar over the past two weeks. The gains observed prior to this period by the Japanese yen and the Swiss franc against the dollar were partially reversed amid a renewed risk-on sentiment. The US dollar appreciated by approximately 1.2 per cent against the Swiss franc and around 1.8 per cent against the Japanese yen.
The euro also lost ground against the US dollar, weakening by roughly 1.2 per cent. During the first half of May, the euro generally underperformed against major currencies, with the exception of the Japanese yen, against which it strengthened by around 0.5 per cent. The standout performer over the period was the Taiwanese dollar, which appreciated against most major global currencies following the positive trade developments between the US and China.
OVERALL
Markets staged a broad recovery in early May, buoyed by easing trade tensions and renewed risk appetite, with technology and cyclical sectors leading gains. Key policy shifts, ongoing geopolitical dynamics, tariff negotiations and credit concerns continued to shape investor sentiment. Commodities and currencies reflected the changing backdrop, as optimism over trade deals lifted growth-sensitive assets while the US dollar regained strength. Nonetheless, fiscal challenges, regulatory uncertainty, and structural pressures in key sectors remain critical headwinds for the global economic outlook.
This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Aria Capital Management (Europe) or any of its related companies to participate in any of the transactions mentioned herein. This material may contain links to third-party websites or content. These links are provided for your convenience only and do not constitute endorsement or approval by ARIA Capital Management (Europe) and is not responsible for the content of linked third-party websites and does not endorse or guarantee the information, opinions, products, or services offered on these websites. Please review the terms of use and privacy policy of any third-party website you visit. The products managed by ARIA Capital Management (Europe) are typically available via professional advisers rather than individual investors, who should not rely on this information, but contact their financial adviser. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. Please refer to the relevant Prospectus and other relevant documents and/or the terms and conditions for any services offered for detailed information. Past performance does not guarantee future results. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. Investors should seek financial advice before making any investment decisions. The products and services here may not be available to residents of all jurisdictions. The investments underlying the company and its sub-funds do not take into account the EU criteria for environmentally sustainable economic activities.
ARIA Capital Management (Europe) Limited is authorised and regulated by the Malta Financial Services Authority, with the Authorised Person ID of FEXS. A Limited Company registered in Malta No: C 26673. ARIA Private Clients is a trading name of ARIA Capital Management (Europe) Limited. Padraig O'Riordan act as tied agent of ARIA Capital Management (Europe) Limited in Ireland.
