Which countries' markets have recovered from Liberation Day?

The recovery in global markets since the crash caused by Donald Trump’s Liberation Day tariff announcement is gathering pace.

Brazil, India, Japan and UK mid-caps have fully recovered and Germany is within a whisker of doing the same. Anyone who held their nerve and didn’t panic sell when markets started to crash on 3 April will now be reaping the rewards for sitting tight.

It goes to show the importance of being patient with investing and not racing for the sell button every time markets go through a particularly dreadful day, such as falling by more than 2% in a single session as we’ve recently seen.

Source: AJ Bell, ShareScope. Data 2 April 2025 market close to 28 April 2025 8.30am BST

Those who bought on the latest dip could be feeling pleased. It can be hard to pluck up the courage and buy when markets are falling, yet history shows that wobbles such as the one we’ve just seen can be great times to buy.

The market fall

The sell-off in financial assets wiped $8.56 trillion from the value of the global stock market between close on 2 April, just before the Liberation Day speech happened, and the end of day on 8 April, as measured by the FTSE All-World index. Markets have subsequently started to recover, and the loss is now only a ‘mere’ $1 trillion.

The S&P 500 index of US companies had fallen by 12.1% by the time markets closed on 8 April as investors panicked about tariffs potentially causing a recession in the States. UK markets had fallen 10.8% by 9 April.

Financial assets declined in value on the prospect of tariffs hurting economies, including the US, and a reduction in corporate and consumer confidence. Wild movements in US government bonds and speculation that Trump might sack Federal Reserve chair Jerome Powell also troubled investors.

The market recovery

Since then, we’ve had a 90-day pause on certain tariffs to allow for foreign countries to negotiate deals with the Trump administration. Markets welcomed that news with open arms as it raised the prospect of a less punitive trade spat.

The Fed’s Jerome Powell gave a speech on 16 April where he implied that tariff-related inflation might only be temporary and that the central bank would do ‘everything we can’ to achieve maximum employment and price-stability goals. Markets took that remark to mean the Fed would always be ready and willing to step in, should the crisis elevate. Notably, the probability of a meaty interest rate cut (half a percentage point) in July has gone up to 45.3% versus 29.9% a month ago.

We then had US Treasury Secretary Scott Bessent say the trade war between the US and China is unsustainable, with Trump suggesting a deal was possible between the two countries. Trump also said he doesn’t intend to fire Jerome Powell which calmed nerves. The cherries on top were reports that the US and China had begun talks to ease trade tensions and that deals were happening, including Beijing granting tariff exemptions on certain American imports.

All of these actions have dialled down the chaos on the markets and let investors sit more calmly, awaiting clarification about which tariffs will apply and to whom. We’re not out of the woods yet as Trump could easily hit a raw nerve and upset markets again. There is also the great unknown regarding business and consumer sentiment which could weaken if the trade war drags on.

Markets leading the recovery

While markets around the world fell after the Liberation Day speech, certain geographies have staged an impressive comeback as there are reasons why investors have been happy to buy.

India is less dependent on exports to the US than other parts of Asia. That’s made it popular with investors looking for regions that may be less affected by Trump tariffs.

Brazil stands to benefit from the trade spat as it is an obvious place for China to source food products rather than the US. Beef, poultry and soybeans are among the items now in greater demand from Brazil.

Japanese market reaction

Japanese markets are bouncing back for two reasons. First, investors are looking to diversify away from the US and Japan offers a rich bounty of interesting companies trading on cheaper valuations than you would find Stateside. Second, Japan is home to tens of thousands of US troops, strategically placed near to Russia, North Korea and China and therefore available if any tensions were to become elevated.

While Japan is still negotiating trade deals with the US, investors buying the region might be taking the view that Trump cannot risk causing too much economic damage through tariffs to its Asian ally.

UK market reaction

UK mid-cap stocks have fared better than large caps as the FTSE 250 is less exposed to US tariffs than the FTSE 100. Consumer-facing businesses such as retailers and housebuilders have performed remarkably well on the London Stock Exchange since Liberation Day. They stand to benefit if the Bank of England cuts interest rates.

Twenty-five companies across the FTSE 350 – the combination of the FTSE 100 and FTSE 250 – are up by more than 10% since the market close on 2 April. This highlights the resilient nature of UK stocks and could be another tick in the box to help win back foreign investor interest in the UK market.