Global Market Recap: Executive Summary

March 2025 witnessed significant volatility across global markets with most indices retreating amid economic concerns and escalating trade tensions. U.S. equities experienced a notable sell-off with the S&P 500 declining 6.16% and the tech-heavy NASDAQ falling 8.14%. The month culminated in dramatic market swings during the final week as President Trump announced aggressive new tariffs, particularly affecting the auto sector. Fixed income markets saw significant shifts with an initial rise in yields followed by a sharp decline as investors sought safe havens. Commodities showed mixed performance with gold reaching record highs above $3,100. Cryptocurrencies faced significant pressure amid the broader risk-off sentiment, with Bitcoin ending March at $82,102. Asian markets deteriorated as trade tensions and growth concerns weighed on investor sentiment.

U.S. Equity Markets

The S&P 500 closed March with a 6.16% decline, a significant reversal from early-year momentum. The month, particularly the final week, was characterized by heightened volatility and sector rotation:

• Technology: The sector led the downside with the NASDAQ declining 8.14%. Notable movements included initial rallies in companies like AMD (+7%), Nvidia (+3.2%), and Amazon (+3.6%) early in the final week, followed by sharp reversals as trade concerns escalated.
• Automotive: The sector experienced severe pressure after President Trump imposed a 25% tariff on imported cars effective April 2. General Motors (-6%) and Ford (-5%) led declines, while Tesla showed relative resilience.
• Financials: Banks faced pressure from concerns about economic growth and the impact of higher bond and credit yields.
• Defensive Sectors: Utilities and consumer staples outperformed the broader market, reflecting investor preference for safety during market turbulence.
• Style Performance: Low-volatility and value factors delivered solid performance, while momentum and growth factors significantly underperformed.

Figure 1 S&P 500 – 1M March

Market volatility increased substantially with the VIX rising from 17.15 early in the final week to 21.65 by month-end as uncertainty over Trump’s tariffs intensified and investors anticipated further trade actions.

European Markets

European equities outperformed U.S. markets relatively, though still faced significant pressure with the STOXX Europe 600 benchmark falling 3.72%. European auto stocks were particularly affected by U.S. tariff announcements, with Porsche, BMW, Mercedes, Volkswagen, and Audi experiencing notable declines during the final week of March.

U.S. Fixed Income

The U.S. bond market experienced significant volatility in March:

• The 10-year Treasury yield closed the month at 4.21%, with dramatic swings during the final week
• Yields initially surged to 4.35% mid-week as optimism rose before plunging sharply by month-end amid safe-haven demand ahead of Trump’s reciprocal tariffs announcement
• The Federal Reserve maintained interest rates at current levels with minimal changes to the dot-plot projections
• The dollar index showed mixed movements, weakening after tariff announcements but finding strength in rising yields earlier in the week

Commodities

Commodity markets demonstrated mixed performance in March, with significant movements during the month’s final week:

• Gold: The precious metal surged to record highs above US$3,100 on escalating trade war fears and plunging global yields. U.S. deficit concerns, inflation worries, and ongoing geopolitical tensions further contributed to its strength.
• Oil: Prices strengthened despite economic uncertainties, driven by geopolitical tensions around Iran and Venezuela sanctions.
• Copper: Prices initially surged but reversed lower on expectations of imminent U.S. tariffs, particularly during the latter part of March.
• Iron Ore: Prices remained relatively stable, hovering around the US$100 level.
• Lithium: Prices weakened, continuing the challenging environment for lithium producers and developers.

Cryptocurrency Markets

Cryptocurrency markets faced significant pressure in March, aligning with the broader risk-off sentiment across financial markets:

• Bitcoin ended the month at $82,102, pressured by ongoing trade uncertainties and risk-off sentiment
• Ethereum dropped significantly to $1,805, underperforming Bitcoin
• XRP and other altcoins showed notable weakness
• Crypto-related stocks retreated, with Coinbase (-7.8%), Marathon Digital (-8.58%), and MicroStrategy (-10.8%) facing sharp losses in the final week of March

The sector faced headwinds from both the deteriorating macroeconomic environment and increasing regulatory scrutiny, leading to capital outflows particularly during periods of heightened market volatility.

Currencies

Currency markets reflected the changing risk sentiment throughout March:

• The U.S. dollar showed mixed movements, weakening after tariff announcements but finding strength during periods of rising yields
• The Japanese yen notably strengthened due to collapsing global yields, driving USD/JPY back below 149 by the end of March
• EUR/USD stabilized around 1.0828 after hitting lows at 1.0733 earlier in the month, pressured by EU tariff threats

Asian Markets

Japan

Japanese markets underperformed significantly in March with the Nikkei 225 falling 7.2%:

• Export-oriented sectors faced severe pressure from global growth concerns and tariff uncertainties
• The strengthening yen created additional headwinds for export-focused companies
• Bank of Japan’s gradual normalization policy raised concerns about liquidity reduction
• Corporate earnings revisions trended negative with analysts cutting forecasts for FY2025

Japanese government bond yields remained volatile as investors reassessed the Bank of Japan’s policy trajectory amid global central bank divergence.

China

Chinese equity markets deteriorated sharply in March with the Shanghai Composite declining 8.3% and the Hang Seng falling 9.2%:

• Property sector distress intensified despite additional support measures
• Manufacturing PMI readings deteriorated further to 48.6, the lowest reading in 14 months
• Deflationary pressures worsened with CPI turning negative at -0.3% year-over-year
• Escalating trade tension concerns significantly impacted export-oriented sectors
• Domestic consumption recovery remained elusive despite targeted stimulus measures

Foreign investors accelerated outflows from mainland Chinese equities, reaching the highest monthly total since 2022. The yuan weakened against major currencies despite intervention efforts.

India

Indian equities faced increased pressure but demonstrated relative resilience compared to regional peers:

• The NIFTY 50 declined 4.3%, outperforming most major Asian indices
• Foreign institutional investors turned net sellers after 14 consecutive months of inflows
• The Reserve Bank of India maintained its hawkish stance amid persistent inflation concerns
• Pre-election policy uncertainty weighed on market sentiment
• IT services sector faced weakness amid concerns about U.S. spending reductions

The Indian rupee depreciated against the U.S. dollar but remained more stable than most emerging market currencies. Bond yields increased modestly as investors reassessed inflation risks.

Key Risks to Watch

As we navigate the remainder of Q2 2025, several risks warrant close monitoring:

1. Trade Policy Developments: Continued escalation of global trade tensions, particularly regarding upcoming reciprocal tariffs announced by President Trump. The market will closely watch the April implementation of the 25% tariff on imported cars and potential retaliatory measures from trading partners.
2. Economic Data: The March employment report and upcoming manufacturing and services PMI readings will provide crucial insights into economic momentum amid trade policy shifts.
3. Inflation Persistence: Continued inflation above central bank targets, especially in services sectors.
4. Credit Quality: Potential deterioration in credit quality across banking sectors globally, with early warning signs appearing in Australia.
5. China Demand: Resource sector volatility due to fluctuating Chinese demand and policy measures.
6. Growth Stock Rotation: Ongoing weakness in growth stocks as markets continue rotating to cheaper market segments.
7. Political Uncertainty: The upcoming Australian election prolonging market uncertainty.
8. Federal Reserve Communication: Several Federal Reserve officials, including Chairman Jerome Powell, are scheduled to speak in early April, potentially providing insights into the central bank’s outlook given recent market volatility.

Outlook

Despite the March pullback creating tactical opportunities in select oversold stocks, we maintain a cautious outlook as markets navigate:

1. Valuation Concerns: Many markets remain at the high end of historical valuation metrics despite recent corrections.
2. Monetary Policy Uncertainty: Central banks continue balancing inflation concerns against growth risks in an increasingly complex trade environment.
3. Geopolitical Tensions: Ongoing conflicts and trade policy uncertainties influence market sentiment and supply chains.
4. Sector Rotation: Continued movement from expensive growth names to value and defensive sectors.
5. Economic Growth: Mixed signals regarding economic momentum across major economies, with particular attention on the impacts of new tariff policies.