Chart of the Week #61: Impact of April 2 Tariffs on Private Markets

Since the April 2 “Liberation Day” tariffs were announced, global equity markets have experienced their most volatile period since the onset of COVID-19. Over the past week, the VIX hit post-pandemic highs, and the S&P saw its largest single-day point swing in history following Trump’s 90-day pause announcement. While the long-term tariff agenda and its economic impact remain highly uncertain, we believe the threat of—and uncertainty surrounding—tariff policy will have broad implications for private markets in the near to medium term. As Keynes famously noted, uncertainty and expectations—what he called  “animal spirits” —matter in both public and private markets.

Even before the April 2 tariff announcement, private equity was already strained by historically low distribution activity, elevated NAVs, and a challenging fundraising environment. As shown in the chart below, PE distributions have historically tracked NAV growth, with few exceptions (the GFC and today). Since 2022, that relationship has broken down, with a persistent and sizeable gap between NAVs and distributions.

In prior periods of low distributions, macro factors or shocks (like the one we’re experiencing now) were the cause of the slowdown in activity. That makes 2023 and 2024 particularly unusual: the macro ingredients for a favorable exit environment appeared to be in place. Public markets were at all-time highs, GDP growth and employment were strong, the Fed began cutting rates, and economic sentiment was strong—particularly following the November elections.

Even with distribution yields already at or near all-time lows, we believe there is room for further decline as tariff uncertainty weighs on exit activity. With IPOs being pulled and M&A activity already off to a historically slow start this year, it seems far more likely that we test a new bottom for distribution yields in the second half of 2025.

We explore the implications of the April 2 tariffs, and our views on their impact to the private markets, in detail in our recently published flash piece. You can access the piece by subscribing to our newsletter, Katmai Labs, here.