Market update April, 07 2025

Equity markets down 20%, but the impact on the Blokland Smart Multi-Asset Fund in April remains limited due to the Emergency Brake.

Bear market

You will have seen the headlines, the market sell-off has accelerated sharply in recent days. As of writing, the S&P 500 Index has dropped more than 20% from its February peak, officially marking a bear market. Below, I’ll walk you through the latest developments and how they’ve impacted the Blokland Smart Multi-Asset Fund.

The emergency brake at work

Let’s start with the fund. Thanks to the earlier activation of the Emergency Brake mechanism in March, the most recent leg down has had minimal impact on the fund’s value. Of course, several factors contribute to this outcome, including the performance of quality stocks against movements in the S&P 500 Index (used for hedging the equity exposure) and the euro-dollar exchange rate, which, notably, moved against the fund in March. Still, as of now, the equity portion of the portfolio is holding pretty steady relative to its value at the start of April. For context, global equities have declined by more than 13% in euro terms over the same period.

If this downturn triggers a global recession, which is becoming a more realistic scenario, the portfolio remains well protected should stock prices go down more from here. Conversely, if Trump were to announce a reversal or reduction of import tariffs, markets could rebound sharply. In that case, the fund would not benefit immediately. Our algorithm requires confirmation of market stabilization before increasing exposure again.

The same logic applies to Bitcoin. The recent drop had zero impact on fund performance, as the portfolio held no Bitcoin exposure throughout the period.

This is not the case for gold, however. The Emergency Brake mechanism does not apply to gold, as it is a safe-haven asset by design, a fact backed by decades of data. Still, during periods of extreme market stress, liquidity dries up. Investors facing margin calls often sell high-performing assets to cover losses elsewhere. We’re seeing this dynamic play out again now, putting short-term pressure on gold prices.

That said, we can reasonably conclude that, as of this writing, the Blokland Smart Multi-Asset Fund has largely sidestepped the damage caused by April’s market correction.

Outlook

At this point, visibility remains very limited. The Trump administration’s unpredictable and often remarkable policy signals continue to inject volatility and uncertainty into markets.

What we do know is that both consumers and businesses have become more cautious. As a result, spending and investment are slowing and could turn negative, raising the odds of a recession. Notably, with the S&P 500 down 22% from its peak, markets may already have priced in ‘an average’ recession.

Interestingly, several members of Trump’s team, including the Treasury Secretary, have stated they don’t expect a recession. Based on current macroeconomic data, that may not be an unreasonable position. However, the reliability of that data is diminishing amid the current volatility. The uncertainty is real and will increasingly be reflected in economic data over the coming weeks and months.

A plausible scenario is that Trump uses his aggressive trade tactics to pressure the Federal Reserve to cut interest rates. With an enormous wave of debt refinancing coming up, rate cuts would help manage the rising cost of U.S. interest payments, which have already surged.

But it’s a risky move. In the short term, import tariffs are inflationary. And higher inflation reduces the Fed’s ability to lower rates.

Ironically, this is exactly the kind of environment that aligns with the long-term philosophy of the Blokland Smart Multi-Asset Fund. One way or another, interest rates will eventually need to come down to preserve debt sustainability. When they do, the value of intrinsically scarce assets is likely to rise significantly.

Interested in the Blokland Smart Multi-Asset Fund?

Contact me at jeroen@bloklandfund.com or visit the website.

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Kind regards,

Jeroen