Market Overview
Global equity markets recorded a modest gain in April, as risk appetites waxed and waned amid growing uncertainty about the US’s new tariff regime.
US trade policy remained front and center in the minds of investors during the month, as uncertainty about US tariffs continued to contribute to volatile markets and increase economic concerns. The administration’s announcement in early April that it was implementing a minimum tariff of at least 10% on imports—with an even a higher tax rate on goods from China—led to a steep sell-off in global stock markets, which worsened in subsequent days after China announced its own set of large tariffs on US goods in retaliation. In response to the market’s negative reaction, the administration announced a 90-day pause in the implementation of these tariffs, sparking a strong relief rally. The administration’s pause, however, did not apply to China, leaving markets on edge for the remainder of the month, as the world’s two largest economies continued in a trade war.
The Federal Reserve also weighed in on US trade policy, stating that the announced import taxes were larger than expected and could create a “challenging scenario” in which the Fed’s dual mandates of maintaining low, stable inflation and keeping the labor market healthy would be in conflict with each other. In such a situation, the Fed stated that it would be forced to choose which of its goals to prioritize. The Fed’s disclosure of its game plan sparked another market sell-off that worsened over the next few days after Fed Chair Jerome Powell faced possible dismissal over the US central bank’s hesitancy to cut interest rates to boost the domestic economy. While lower interest rates would be a boon for stock markets, investors appeared more concerned that the Fed Chair’s dismissal could undermine the independence of the Fed, which is widely viewed as the central pillar of the US financial system. In the closing days of the month, markets rallied after President Trump stated that he had no intention of firing Powell and on hopes the US would roll back some of its tariffs, especially on China. The yield on the benchmark 10-year US Treasury note ended April at 4.18%, 3 basis points (bps) lower than a month earlier.
For Europe, news that US tariff policy included a 20% import tax on goods from the European Union, which came on the heels of last month’s announcement of a 25% US tariff on its steel, aluminum, and auto imports, added to the Continent’s uncertain economic outlook. The European Central Bank (ECB) cut interest rates by 25 bps in April, citing a weakened economic outlook in the eurozone given trade frictions. In the UK, the Bank of England stated its economy was not in recession; however, it could face a “growth shock” from US tariffs, indicating the British central bank could lower borrowing costs at its next policy meeting in May. In April, the yield on the 10-year German Bund, Europe’s principal safe-haven asset, fell 30 bps, ending the month at 2.45%.
The start of the new earnings season gave investors the latest update on how company profits have held up amid a challenging macro environment. In the US, 76% of the companies in the S&P 500 Index that reported results topped consensus estimates, outperforming the long-term average of 67%. The first-quarter earnings growth rate is estimated to have increased 12.3% from a year earlier. In Europe, 47% of the companies in the STOXX 600 Index that reported results posted better-than-expected earnings, below the 54% that do so in a typical quarter. The first-quarter earnings growth rate is expected to have contracted 6.8% from a year earlier. In Japan, 59% of the companies in the TOPIX that reported results posted positive earnings surprises, surpassing the 55% beat rate over the past four quarters. The first-quarter earnings growth rate is estimated to have increased 23.7% from a year earlier. In Hong Kong, 63% of the companies in the Hang Seng Index that reported results registered better-than-expected earnings, outpacing the 54% beat rate over the past four quarters. The first-quarter earnings growth rate is projected to decrease 3.3% from a year earlier.
Against this backdrop, equity markets in both the developed and developing worlds rose in April, with the latter outperforming the former. In the US, the S&P 500 fell for the third consecutive month, as strong earnings results were offset by concerns that the US’s tariff policy will lead to an economic recession. In Europe, the STOXX 600 outperformed, as stocks markets benefited from attractive valuations, and the Continent’s low interest-rate environment. In Japan, the TOPIX outperformed, thanks to a strong yen and despite and fears that a global trade war would adversely impact the country’s export-reliant economy. In China, the Hong Kong-based Hang Seng Index fell, as investors feared that a trade war between the US and China will hurt global demand for Chinese goods, thus hurting company earnings.
Consumer staples was the best-performing sector in April, as heightened global economic uncertainty led investors to re-risk into defensive stocks. Energy was the worst-performing sector, as shares of oil producers fell in sympathy with the sharp decline in the price of crude oil stemming from concerns about a potential global economic downturn. The price of Brent crude oil, the international benchmark, recorded its largest monthly decline on a percentage basis since November 2021.
Outlook
Increased uncertainty surrounding the US economic outlook and key policy measures, including specifically tariffs, are now weighing more heavily on markets and have interrupted what had previously been, in our opinion, a clearer line of sight towards decelerating inflation and strong likelihood of success achieving an economic soft-landing. Our base case expectations for moderate economic deceleration have been further thrown in doubt during April as the announced US tariff measures were more punitive than anticipated and triggered a wide range of retaliatory responses as well as grave warnings from key stakeholders of US commerce and industry.
While markets continue to wrestle with considerable uncertainty, we expect Infrastructure to continue to exhibit critical defensive qualities and remain an invaluable diversification component for investment portfolios given the essential nature and real asset characteristics of the asset class. In contrast to businesses and industries where valuation is underpinned primarily by revenue growth and competitive profit margins, critical infrastructure derives considerable valuation support from its high fixed cost of investment and high visibility, high margin cash flows collected over long periods of time [to recoup the initial capital outlay].
This important combination of characteristics tends to lend itself to superior defensive positioning, in our view, against global trade uncertainty, inflationary pressure, economic recession and market volatility. On the risk side of the ledger, however, we include typically above-average levels of balance sheet leverage and sensitivity to interest rates.
From a sectoral standpoint, we see a number of multi-year critical infrastructure investment trends likely to continue largely undeterred by recent tariff and trade uncertainty. Electrification and the growing demand for power serves as an example, in our view. Utilities were a key positive contributor to performance during 2024 and have been a defensive respite thus far in 2025. While we maintain a favorable sector outlook for Utilities and foresee scope for upward earnings revision, valuations have also re-rated higher, and we do not expect the same pace of returns for utilities to continue in the US. On the other hand, we continue to find very compelling valuations and opportunities in utilities outside the US.
Outside of the utilities sector, we believe US midstream energy, namely oil & gas storage and transportation, continues to offer a compelling combination of attractive valuation and improved capital allocation discipline. And while increased uncertainty regarding global trade and the risk of global recession now weighs more heavily on energy prices and the sector earnings outlook generally, the vast majority of the cash flows associated with the portfolio’s midstream holdings are fee-based and enjoy strong support from take-or-pay contracts and spread differentials at key access points.
Elsewhere within the portfolio, we see an abundance of opportunities stemming from large-scale investment in transportation infrastructure, information technology and energy development & security, leading to increased demand for materials, capital goods and industrial equipment.
We believe the portfolio remains well-positioned to take advantage of these opportunities in real asset infrastructure businesses as well as key enablers, including materials, services, and technologies, that will both facilitate and benefit from increased investment in infrastructure.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
Information and opinions presented have been obtained or derived from sources believed by Lazard Asset Management LLC or its afflliates (“Lazard”) to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change.
Allocations and security selection are subject to change. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities. It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries.
Securities and instruments of infrastructure companies are more susceptible to adverse economic or regulatory occurrences affecting their industries. Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including additional costs, competition, regulatory implications, and certain other factors.
Certain information contained herein constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “intent,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events may differ materially from those reflected or contemplated in such forward-looking statements.
Published on May 20, 2025.