Damage control

Market index returns

Week to date since April 23, 2025 as of April 30, 2025

Index definitions: Global Real Estate = FTSE EPRA/NAREIT Developed Index; Global Infrastructure = Dow Jones Brookfield Global Infrastructure Index; Natural Resource Equities = S&P Global Natural Resources Index; Commodity Futures = Bloomberg Commodity Index; TIPS = Barclays US TIPS Index; Global Equities = MSCI World Index; Real Assets Index = 30% FTSE EPRA/NAREIT Developed Index, 30% Dow Jones Brookfield Global Infrastructure Index; 15% S&P Global Natural Resources Index; 15% Bloomberg Commodity Index, 10% Barclays TIPS Index. Source: Bloomberg, DWS. Past performance is not indicative of future results. It is not possible to invest directly in an index.

Markets continued to claw their way back after touching year-to-date lows on April 8th. De-escalating U.S. rhetoric on tariffs has brightened the mood, with talk of off-ramps and trade deals helping to fuel a comeback in equities. Easing the impact of auto levies is Trump's latest move to demonstrate some flexibility, whilst a report the U.S. had been proactively reaching out to China through various channels raised hopes that trade talks may prove constructive. The Fed and the IMF/World Bank have helped underpin the recent rally. Despite a contraction in the U.S. economy at the start of the year, investors are pinning their hopes on Fed rate cuts to sidestep a potential U.S. recession, whilst the IMF took a slightly more optimistic view of the economic fallout from the U.S. tariffs, cutting growth forecasts in its World Economic Outlook but stopping far short of predicting recessions. Nonetheless, sentiment remains fragile as reflected in the wild intra-day swings in markets throughout April. As the clock steadily ticks down on the 90-day pause Trump had granted on the steepest levies, trade negotiation outcomes remain highly uncertain, weighing heavily on the outlook and investor sentiment. Yields also remain elevated amid lingering concerns that tariffs could hurt foreign demand for U.S. debt and raise inflation. 

Against this backdrop, we expect conditions to remain choppy as investors await key macro data, trade deals, and earnings to guide their next moves.

Global Equities outperformed the Real Asset Index as technology, consumer discretionary, and communications sectors outperformed the broader market. Global Real Estate Securities, Global Infrastructure, and U.S. TIPS (inflation-protected securities) outperformed the Real Asset Index in the period while Natural Resource Equities marginally underperformed on a relative basis, despite providing positive returns. Commodity Futures was the only segment to post negative returns in the period as the Industrial Metals, Energy, Agriculture, and Livestock segments retreated. Looking at other metrics we track, the VIX, an index that measures the expected volatility of U.S. stocks, ended the period at 24.7, down 13% from the prior week, settling down 53% from its peak of 52 on April 8th. Credit spreads recorded modest increases as below-investment grade spreads widened 7 basis points (bps), a 2% move, and high yield spreads widened 2 bps, a 1.5% move. The U.S. dollar weakened 0.4%, as measured by the DXY Index, and oil prices also fell below $60 per barrel, ending the period at $58.2 per barrel. Inflation expectations were lower, as measured by 5 & 10-year breakevens, which fell 4 bps and 7 bps, respectively. Gold prices were steady, ending the period at an elevated $3,289/ounce.^[1]

Why it matters: We continue to monitor economic data, as well as sentiment indicators, as they could eventually feed through to the hard data. Capital markets and corporate leaders have clearly voiced their displeasure about uncertainty and the possibility for a protracted trade battle and the damaging effect that these could have on the economy.

This week we will review the latest Q1 GDP (gross domestic product) data from several countries, the U.S. March personal consumption data will be published, including much-watched inflation figures, and the latest U.S. labor market report will round off a busy week. 

• Q1 growth check: In the U.S., the advance gross domestic product report for the first quarter showed GDP contracting at a 0.3% annualized rate last quarter, slightly below consensus expectations. Given the volatility that comes from front-loaded imports and consumption due to tariffs, this was always going to be a tricky one as any demand that was pulled forward to start the year will be a headwind to growth ahead. On the other side of the Atlantic, the Euro-area economy grew more than expected to start the year, marking a fifth consecutive quarter of growth. According to Eurostat, Q1 GDP jumped 0.4% QoQ versus a Bloomberg survey estimate of 0.2%. Germany and France both returned to growth; however, the main impact of tariff volatility and political uncertainty is still to be seen in the economic data.^[2]
• Inflation Watch: With the impact of tariffs not yet visible, the latest data confirms that inflation was actually on a good trajectory leading up to Liberation Day. The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, was unchanged in March after advancing 0.4% in February. In the 12 months through March, PCE prices increased 2.3% after rising 2.7% in February. The slowdown is likely to be only a temporary respite if current tariff policies remain in place.^[3]
• U.S. Employment: U.S. employment was stable in April. Despite concerns over tariffs and government sector layoffs, the U.S. added 177,000 jobs for the month while unemployment rate held steady at 4.2%, according to data released Friday by the Labor Department. April’s 177,000 jobs growth came in above consensus expectations (135,000) but shy of the 228,000 jobs the economy added in March. U.S. employment is showing signs of resilience amidst heightened uncertainty over economic policies and stock market turmoil.

Real Assets, Real Insights:  This week we will look at the impact of political instability on France’s real estate market, Europe’s long-term attractiveness as an infrastructure market, and the U.S. and Ukraine’s minerals deal.

• Notre Dame Rises; Will the Real Estate Market?  (Real Estate):  After being destroyed by fire five years earlier, in late 2024, fifty world leaders gathered in Paris for a historic ceremony marking the reopening of Notre Dame. As our real estate research team notes, this landmark event of national pride stood in stark contrast to the political upheaval that gripped France throughout 2024, and which severely tested the country’s credibility, economic performance, and investor confidence. So, what of Real Estate? 2024 marked another year of weak performance, with subdued occupier activity across all sectors. Whilst risks remain skewed to the downside and short-term economic growth is expected to be subdued, France’s strong fundamentals and strategic position in Europe act in its favor. Furthermore, the sharp rise in defense spending may bolster economic activity in the medium term. In today’s market, our real estate research team believe sustained rental growth and stabilizing yields will drive the recovery in French real estate, with the logistics sector leading the way. To learn more, check out our recent paper here: DWS Real Estate Research | Notre Dame Rises; Will the Real Estate Market?
• No hay luz (Infrastructure):  On Monday, the Iberian Peninsula experienced an unexpected power outage that led to blackouts in Spain and Portugal and even parts of southern France. It was the largest blackout in Europe’s history. The causes are still being investigated and it will likely take some time before we understand the full picture. At approximately 12:30 p.m. local time, electricity generation in Spain dropped rapidly from around 27 gigawatts (GW) to around 12 GW. The sudden drop in grid load destabilized electricity flows, which require an extremely stable frequency of 50 Hertz to maintain supply. Spain exports electricity to Portugal, so the collapse of the Spanish grid quickly spread throughout the Iberian Peninsula. In its preliminary report Spanish grid operator REE ruled out a cyberattack. However, a breakdown in Spain’s solar power system was certainly involved. Data from REE show that on Monday, solar generation dropped at 12:30 p.m. from around 18 GW to just under 5 GW by 1:35 p.m., which accounted for most of the overall drop. The power was restored the following day. The outage highlights the importance of CapEx in grids, grid stability and resilience, and the need to have large generation plants that play a key role in maintaining the frequency and stability of the system. This discussion is timely given upcoming regulatory review for grids in Spain (for the 2026 – 2031 period) and the debate around potential nuclear expansions.^[4]
• A big (minerals) deal (Commodities):  After months of tense negotiations, the U.S. and Ukraine have signed the long-awaited deal to create the United States-Ukraine Reconstruction Investment Fund that is expected to give Washington privileged access to Ukraine’s natural resources and critical minerals. The agreement will create a fund to attract global investment into Ukraine, with the U.S. getting first claim on profits transferred into the jointly managed fund. The deal is intended in part to reimburse the U.S. for future military assistance to Ukraine. The New York Times reports that the agreement could provide a windfall to the U.S., but the resources will be expensive to extract, and any progress is unlikely while the war rages. Maps showing trillions of dollars of mineral deposits scattered across Ukraine — including in areas occupied by Russian forces — are based largely on outdated studies, and proper surveys could take several years to complete, experts said. The deal comes amid growing concerns over China’s dominance in production and processing capacity in the rare earth element market, prompting efforts to diversify supply chains and reduce dependency. As the investment fund becomes operational, its performance will be closely watched by commodity markets and global policymakers.^[5]