Bond fund inflows crash but equity investors 'buy the dip' amid Trump tariffs

Trump tariffs have had an immediate impact on the stock market, with a huge bond fund sell-off, while more bullish investors have been buying the dip in US equities.

US president Donald Trump rattled stock markets last month when he announced a series of new trade tariffs.

The UK may have since negotiated a better trade deal, but investors have been wary about the economic impact.

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The latest Fund Flow Index from data provider Calastone shows UK investors pulled capital out of bond funds in April 2025 at the fastest rate since the onset of the pandemic in April 2020.

However, as the uncertainty weighted on stock markets and pushed indices such as the S&P 500 down, some canny investors have seen this as a buying opportunity while prices are low in the hope of a recovery.

Others have been seeking traditionally safe havens.

Here is how the awful April for the stock market affected investor attitudes.

Safe havens soar

Money market funds saw inflows of £589 million during April, the fifth best month on record.

The past three months have seen the strongest inflows to money market funds than any other three-month period, Calastone said.

Bad month for bonds

Investors withdrew a net £1.24 billion from fixed income funds in April, the second consecutive month of strong selling and the highest rate since the pandemic.

The April outflow was still a long way short of the £3.37 billion taken out in April 2020 as lockdowns swept the world, Calastone said.

Even so, April 2025 saw net selling 46% higher than the third worst month of September 2024. It also follows a very weak March which was itself the fourth worst month on record for the sector.

It comes as central banks and governments have had to adapt to geopolitical tensions and the new US trade policy.

Edward Glyn, head of global markets at Calastone, said: “There are clearly concerns about government finances if the global economy slows as much as many are now predicting and this may be a factor.

"Equally the bond market seems to be the one force that has so far been able to constrain the wildest instincts of the US president and the associated volatility that entails. This may be why investors are pulling out of bond funds and parking so much cash in safe-haven money market funds.”

Buying the dip

Stock markets may have dropped off the back of the US tariff announcements but many experts suggests this presents a buying opportunity for the top investment funds while prices are lower for long-term investors.

Many have recognised this, with investors adding a net £1.52 billion to their equity fund holdings in April, the fourth consecutive month of improvement.

The biggest beneficiaries were actually funds investing in North America, with a particular focus on index-tracking funds. Investors added a net £1.51 billion to North American equity funds, with the net buying beginning in earnest on 8 April, just as the market began to speculate that president Trump was about to reverse his Liberation Day tariff schedule.

Global funds, which are heavily weighted to US equities, also saw strong inflows, totalling a net £1.48 billion.

There was, however, strong net selling of emerging market and Asia-Pacific equity funds with outflows of £591 million and £534 million respectively, the worst month on Calastone’s record for emerging markets. European equity funds saw net selling of £145 million.

UK-focused equity funds also saw further net selling in April, but at £521 million it was the ‘least bad’ since July 2024, Calastone said.

Glyn added: “The interest in US equities in April may simply be a ‘buy the dip’ tactic. Certainly inflows tailed off at the end of the month by which time the US stock market had recovered half the peak-to-trough losses it had suffered between the middle of February and early April.

“The slowdown in outflows from UK-focused funds reflects the relative outperformance of the UK market year-to-date. Although it is still below its February peak, the UK market is up so far in 2025. This has not been enough to tempt UK investors into a wholesale reassessment of their negative view on UK shares, however.

"Emerging markets are vulnerable to financial instability and are heavily weighted to China. With China singled out for Trump’s harshest tariffs, concerns over economic growth are clearly the reason for investors to draw down their emerging market and Asia fund holdings.”