The Pinnacle: March 2025
March 2 0 2 5 • I S S U E 51
March Markets
The first quarter of 2025 was a period of significant adjustment for global financial markets, characterised by policy shifts, geopolitical developments, and natural market recalibrations. While certain sectors experienced downturns, it's essential to recognise that such corrections are integral to the economic cycle, often paving the way for healthier, more sustainable growth.
US Markets
U.S. equity markets faced notable volatility in Q1 2025. The S&P 500 declined by 4.3%, marking its most challenging quarter since 2022. This downturn was somewhat influenced by investor concerns over potential stagflation, spurred by the Trump administration's tariff announcements. However, it's important to understand that market corrections serve to temper overvaluations and can lead to more robust economic foundations. Historically, such adjustments have provided buying opportunities for investors, setting the stage for future gains.
Eurozone
European markets demonstrated resilience during the first quarter. The MSCI Europe ex-UK Index was up 6.4% over the quarter, bolstered by robust earnings reports and proactive fiscal policies. The European Central Bank's (ECB) decision to lower its main policy rate by a cumulative 50 basis points to 3.65% over the first quarter of 2025 further signalled a commitment to fostering economic growth. Germany's DAX Index, in particular, recorded its strongest first quarter since 2023, reflecting investor confidence in the region's economic prospects. Such developments underscore Europe's potential for sustained expansion, even amidst global uncertainties.
UK Markets
The UK's FTSE 100 index reached new heights during the quarter, driven by gains in homebuilder stocks and favourable economic indicators. The UK FTSE All-Share Index was up 4.5% over the quarter, further emphasising the regions strong performance. This performance reflects the market's confidence in the UK's economic resilience and its ability to navigate external challenges effectively. Additionally, the UK's services sector showed signs of growth, with the Services Purchasing Managers' Index (PMI) reaching 53.2 in March. Here a reading above 50 indicates expansion in the sector while a reading below 50 indicates contraction.
Asia Emerging
Emerging Asian markets presented a mixed picture. Chinese equities outperformed, buoyed by advancements in artificial intelligence and supportive policy stances from Beijing, up 15% over the first quarter. Conversely, other regions faced challenges, with capital outflows influenced by global trade uncertainties, with the MSCI Asia ex-Japan Index up only 1.9% for the quarter. While such dynamics can pose short-term hurdles, they also offer opportunities for these markets as structural reforms and diversifying of economic partnerships often lay the groundwork for robust future growth.
Commodities
Despite declining oil prices, commodity markets experienced strong performance as a whole, up 8.9% over the quarter. This move was largely driven by gold prices which surged by 19% over the quarter, reflecting its status as a safe-haven asset amid market volatility. Such trends highlight the nuanced dynamics within commodity markets and the importance of diversification in investment strategies.
The first quarter of 2025 highlighted the effect that policy decisions can have on market movements in the short-term. While certain sectors faced adjustments, these periods are integral to the market's evolution, often leading to more sustainable growth trajectories. Investors are encouraged to maintain a long-term perspective, leveraging diversification to navigate the ever-evolving economic landscape.
Global Trade: An Overview of the Current Landscape
The global trade landscape is undergoing a new phase of transformation, catalysed by recent developments in US trade policy. Most notably, President Donald Trump’s “Liberation Day” tariff announcement on April 2, 2025, has re-energised discussions around fair trade, domestic competitiveness, and global supply chain diversification. As the world digests the implications of these changes, there are both challenges and opportunities for investors, policymakers, and businesses to navigate in this evolving environment.
The Liberation Day Tariffs: A Strategic Pivot
Trump’s plan sets a 10% baseline tariff on all U.S. imports, with specific higher rates targeted at China (34%), the European Union (20%), and Japan (24%). While this move represents a significant policy shift, it is also a strategic recalibration which the Trump Administration aims at strengthening domestic industries and enhancing the resilience of American manufacturing and supply chains. The long-term goal of the Trump administration is to encourage reshoring of production and create a more “level playing field” for US businesses. While the administration believes they can achieve the goals they have set out through their tariffs, this is widely debated amongst economists globally.
Initial Market Movements: Volatility Reflects Uncertainty, Not Instability
Markets responded swiftly to the news, with equity indices seeing a short-term correction. This reaction is consistent with previous tariff announcements and reflects investor uncertainty around how quickly businesses can adapt. JPMorgan has noted that while there is an increased risk of slower growth, these dynamics are manageable with policy support and market flexibility.
Commodities Adjust to Trade Sentiment
Commodity markets, especially oil, have seen price adjustments as traders’ factor in potential shifts in global demand. Brent crude recently fell to $63.30 per barrel, while WTI dropped to $59.79, a response aligned more with sentiment than fundamentals. Many analysts interpret these moves as temporary and expect stabilisation as new trade routes and energy strategies are implemented.
Global Reactions: A Measured and Cooperative Approach
Major US trading partners have adopted a measured tone in response. The European Union, represented by German Ambassador Miguel Berger, emphasised a preference for negotiation while signalling readiness to respond proportionately if needed. This diplomatic posture reflects a broader global commitment to maintaining trade openness, even amid rising protectionism. The World Trade Organisation has acknowledged potential headwinds for global trade but emphasises the importance of continued dialogue. They have encouraged member states to resist escalation and work toward modernising trade rules to reflect today’s economic realities.
Opportunities for Emerging Markets and Regional Integration
One of the underappreciated outcomes of this policy shift could be the acceleration of regional trade agreements and nearshoring initiatives. Southeast Asia, Latin America, and parts of Africa are well-positioned to attract investment as firms reevaluate their global footprints. Singapore, with its strategic location, trade infrastructure, and financial expertise, stands to benefit significantly from increased intra-Asia trade and supply chain realignment.
While the “Liberation Day” tariffs mark a turning point in global trade dynamics, they also signal a broader theme of economic rebalancing. For long-term investors and businesses alike, the path forward will require thoughtful positioning, diversified exposure, and a readiness to adapt to new paradigms.
Sources
Financial Times. "US stocks post worst quarter since 2022 as Trump tariff worries swirl."
J.P. Morgan Asset Management. "Review of markets over the first quarter of 2025."
Financial Times. "UK services growth offers respite for Rachel Reeves ahead of Spring Statement."
Reuters. "Crude oil's demand woes shown by softer Q1 Asia imports: Russell."
J.P. Morgan Asset Management. "Review of markets over the first quarter of 2025."
Wall Street Journal, April 2, 2025
Wall Street Journal, April 3, 2025
Reuters, April 6, 2025
Wall Street Journal, April 5, 2025
Reuters, April 3, 2025
Wall Street Journal, April 4, 2025