March 2025 Quarterly Market Update
Read our latest market and economic update for the first quarter of 2025.
Key points:
Equity Markets Start the Year Off Poorly: In the US, the S&P 500 and NASDAQ experienced significant declines as investors shifted to less risky stocks. This impacted the AI sector significantly, following China's DeepSeek disrupting the sector. The 'Magnificent Seven' companies' decline greatly affected market performance, with Tesla falling by over 31%. European equities outperformed the US, while emerging markets benefited from a weaker US dollar and falling US Treasury yields.
Trump 2.0 Effect: In Q1, Donald Trump's threat of widespread tariffs created market uncertainty. Fears that these policies would induce re-inflation or economic recession weighed heavily on investor sentiment. Trump's sporadic and unpredictable policy announcements further compounded investor confusion.
Bond Prices Increased: Global fixed income markets rose due to heightened uncertainty. Investors moved from riskier assets, such as equities, to defensive assets like bonds. The increased risk of economic downturn or recession has led markets to price in more interest rate cuts than previously anticipated, further suppressing bond yields.
US Dollar Weakness: After strengthening in Q4, the US dollar weakened in Q1 2025 due to concerns about the US economy. Reduced economic prospects made the US less attractive compared to economies with higher growth potential.