Developed market (DM) equities recorded their second consecutive monthly fall (MSCI World -4.4% MoM), pushing them into negative territory for 1Q25 (-1.7% QoQ). US mega cap tech stocks were amongst the worst-performing cohort, with the Bloomberg Magnificent Seven Index falling 10.2% MoM in March to leave it down 16.0% YTD. Tariffs continued to weigh on investor sentiment as March started with confirmation that US President Donald Trump would push ahead with tariffs on Canadian and Mexican imports. A day later, Trump announced a 10% increment to tariffs on Chinese imports (in addition to the 10% increase announced in February), and later in March came the announcement of a 25% tariff on c. US$240bn of vehicles imported into the US annually.
Investors ended the month anticipating further tariff announcements on 2 April (which Trump has dubbed “Liberation Day”) with a raft of reciprocal tariffs on US trading partners anticipated. Investors appear increasingly concerned by Trump’s apparent willingness to stomach economic weakness en route to achieving his policy agenda as he suggested that his economic policy is likely to cause a “period of transition for the US economy”.
European bourses (Eurostoxx 50 flat MoM in US dollar terms) outperformed their tech-heavy, US-listed counterparts (S&P 500 -5.6% MoM) for the fourth consecutive month. Value stocks (MSCI World Value Index -1.3% MoM/+4.8% YTD) once again outperformed their faster-growing peers (MSCI World Growth Index -7.5% MoM/-7.8% YTD), having underperformed that cohort by c. 50% over the past two calendar years.
Emerging market (EM) stocks fared significantly better than their DM counterparts (MSCI EM +0.5% MoM) as Chinese stocks continued to recover from depressed levels on improving prospects for much-needed economic and policy support from the Chinese government. Hong Kong-listed Chinese corporates (Hang Seng China Enterprises +1.2% MoM) are now up 17.6% YTD. Indian stocks (Nifty 50 +6.3% MoM), as well as stocks listed in Brazil (Bovespa +6.1% MoM), also contributed to the strong EM stock market performance in March.
Despite increasing concerns around US economic growth, the US 10-year government borrowing rate ended the month unchanged at 4.2% p.a. as investors worried that the US Federal Reserve (Fed) could struggle to meaningfully cut interest rates to support economic growth if tariffs were stoking inflation. After a strong start to the year, the US dollar fell against most major currencies for the second consecutive month (US Dollar Index -3.2% MoM/-2.1% YTD).
