Executive Summary
Stocks had a roller-coaster April and ended higher in USD terms. However, due to the weakness of the USD, returns in SGD turned negative. Foreign exchange (FX) volatility is a normal part of investing, and over time, stock returns tend to outweigh FX fluctuations. Despite the market volatility, Providend remains committed to walking with you every step of the way.
April Performance
One can be forgiven for assuming that the world, or at least the financial markets was ending in April, given the amount of fear in the markets after the tariffs were announced by the US on 2 April 2025. However, what is probably one of the most unexpected outcomes is that, by the end of April, US stocks had recovered to their 2 April 2025 levels, and US bond yields (despite all the fear in bond markets) were also back to their 2 April 2025 levels.
This would be fantastic news in general for investors, were it not for the fact that in the same period, the US dollar depreciated sharply against other currencies. Against the SGD, we saw the USD/SGD drop from about 1.34 to 1.30 –about a 3% fall –which means that in SGD terms, our portfolios would see a 3% lower performance compared to the returns in USD.
Exhibit 1: Major Indexes – April 2025 Performance
As we can see from the chart above, in USD terms (the first three bars from the left), stock indexes were up in April, as markets fell on the news of the tariffs, and then slowly recovered towards the end of the month. Bond yields also fell, leading to the bond indexes delivering positive returns in April too.
However, we can see that after accounting for the impact of foreign exchange (FX), the equity indexes in SGD had a negative return in April as the USD/SGD fell over the same period (See Exhibit 2 below). Our bond positions in the portfolio are hedged; therefore, the FX move did not have the same impact. In fact, the USD weakness led to outsized gains for the unhedged bond index (which we do not invest in), which we have included just to display the impact of the move in FX markets in April.
Exhibit 2: USD/SGD April 2025
Our Portfolios: A Tale of Two Currencies
Exhibit 3: Index Plus Portfolios in USD – April 2025
Exhibit 4: Index Plus Portfolios in SGD – April 2025
Looking back at the portfolios in April, we can see that in USD, our portfolios did well to deliver positive performance for the month, recovering in line with the markets. Our allocation to short-term fixed income also benefitted the less risky portfolios, as we can see that the Conservative, Low Risk and Fixed Income portfolios all outperformed the portfolios with a heavier allocation to equity and intermediate bonds.
Unfortunately, the USD weakness in the month of April meant that only the Fixed Income portfolio delivered a positive return in SGD, as our bond funds are invested in currency-hedged share classes. The stronger SGD meant that the equity in the portfolios that are in USD would be valued less in SGD at the end of April compared to the start of April, so, as we can see from Exhibit 4, our SGD portfolios with equity exposure experienced a negative return.
Equity Volatility Outpaces FX Volatility
A natural question to ask is if hedging FX makes sense for equity exposure. However, the data shows that it’s not worth the cost in the long term. The reason is that the returns from equity will far overshadow the returns from FX.
Exhibit 5: S&P 500 Returns vs USD/SGD
Looking at the five-year returns of the S&P 500, compared to the movement of the USD/SGD, the returns of the S&P 500 are far larger than the current move in the currencies.
We can also see that this is not the only period of USD weakness. In fact, during the past few market rallies in 2021 and 2023, to 2024, the USD/SGD has also experienced some weakness, so it is not unusual for USD/SGD to fluctuate either. A weaker USD is also not necessarily a bad thing for companies we invest in. For example, a company like Apple that generates about 50% of its revenue in non-US sales, would see 50% of its sales outside of the US worth more when converted back to its reporting currency.
While the large move in the currency over the past month is definitely noticeable and not without cause for concern, the longer-term impact on the portfolios might not be as drastic as the financial headlines would imply.
Sell in May?
The current trajectory of US economic policy has heightened the uncertainties for financial markets. The International Monetary Fund (IMF) has downgraded the global economic growth forecast by 0.5%, from 3.3% in January to 2.8% in April, following the tariff announcements.
However, predicting how financial markets will move is extremely difficult. Despite all the concerns currently, we have seen stock markets rally to close out April and continue the rally into May. We have also seen bond yields hold fairly steady, and the USD has also started to recover. The U.S. Dollar Index (DXY), which measures the USD against a basket of major currencies, has risen 2% since the recent low on 21 April 2025.
Therefore, at Providend, we continue to encourage our clients not to make decisions based on short-term information. While the tariffs do have an economic impact, it is still uncertain right now what the overall impact will be in the long term. Ongoing negotiations to reduce tariffs, along with the possibility of increased trade outside of the US, may mitigate the impact of reduced trade with the US.
Focus on Your Long-Term Wealth Plan
In light of the current economic uncertainty, it may be a good time to review key areas such as loan exposure, insurance coverage, and emergency funds to ensure they are at comfortable levels for you.
Additionally, reviewing your wealth plan to incorporate any new goals or adjusting existing goals in line with the current economic realities would be a sensible course of action. After reassessing your goals, it may then make sense to adjust your portfolio, should your goals change and a new asset allocation be more suitable.
Please know that your Client Advisers and the entire Providend team are here for you during these uncertain times. Don’t hesitate to reach out if you have any questions or concerns. Thank you for your continued trust and support—we truly appreciate it.
For more related resources, check out:
1. What Investors Should Know About the US Reciprocal Tariff and Market Volatility
2. Staying the Course: Investing With Confidence in Uncertain Times
3. Financial Lessons From the Garden
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