T3 Monthly Insights - Mar 2025

In March, the U.S. market tumbled into bearish sentiments as President Trump's administration enforced aggressive tariffs on imports following weeks of uncertainty and speculation, fuelling major investor anxiety and dampening risk appetite. VIX hit the highest level this year of 27.86 in mid-March. The S&P 500 ended the month down 5.75% from February, closing at 5,611.85, while tech-heavy Nasdaq Composite dipped an astonishing 8.21% with closing prices of 17,299.99 – levels not seen since July 2024. The dollar weakened by 2.83% to 104.21, continuing its downward trend since January.

The U.S. implemented aggressive tariffs, including a 25% levy on Canadian and Mexican imports and doubled tariffs on Chinese goods, sparking retaliatory threats and market fears. After revising tariffs to exempt USMCA goods, confusion grew. New tariffs on steel and aluminum triggered EU retaliation, while additional tariffs targeted Venezuela and its trade partners. The constant policy shifts have created uncertainty, with economists warning of potential recession or stagflation due to the unstable trade environment.

The Fed kept interest rates steady at 4.50% as widely expected. Fed Chairman Jerome Powell indicated that elevated inflation has moderated over the last year, supporting the Fed’s position to react accordingly to the recent tariff scares and its impact on inflation and economic growth. However, analysts are expecting continued slowdown in economic growth and increased inflationary pressures as the year progresses, with the Fed lowering their GDP forecast from 2.1% to 1.7% and increasing their core inflation projections for 2025 from 2.5% to 2.8%.

Meanwhile in the Eurozone, the Stoxx Europe 600 Index dipped 4.18% from February to close at 533.92, amidst tariffs on European steel and aluminum exports to the U.S. The euro appreciated against the weakening dollar, rising 4.25% to 1.0816. The European Central Bank lowered its key interest rates by 25bps, reflecting lower exports and ongoing weakness in investments originating from high trade and broader policy uncertainty. 

In the U.K, the sterling closed at 1.2918, an almost 3% appreciation MTD. The Bank of England (BoE) kept interest rates at 4.5%, a decision widely anticipated by economists. Annual CPI cooled to 2.8% in February from 3.0% in January, despite BoE’s forecast for inflation to hit 3.7% by Q3 2025. Amidst the global trade tensions, recent forecasts indicate continued economic slowdown in the U.K, with the Office for Budget Responsibility halving GDP growth projections to just 1.0% in 2025.

Investor trends pivoting towards safer assets like gold were reinforced in March, with the price of gold soaring 10.6% from February to close at an all-time high of $3,150.30. The rally underscored a broad 'risk-off' revival, with capital fleeing equities for defensive havens as investors braced for the looming uncertainty of April 2nd’s 'Liberation Day.