Global markets have experienced a turbulent start to the year. Expectations coming into 2025 were that the new Republican administration in the U.S. would reinforce the dominance of American equities, the reality however has been more complex. The administration’s aggressive trade policies have introduced new uncertainties weighing on US stock market returns that many investors are calling the “Trump Slump”.
U.S. equity markets endured a turbulent quarter, with tariff-related headlines triggering significant swings. Despite a strong January, the US market recorded a negative return of -8% with the technology market falling -11%, making it the worst quarter since Q3 2022 for US stocks. The imposition of new duties on imports from Mexico, Canada, and China in February was followed by further levies on steel, aluminium, and autos in March. Investors responded warily as US businesses thought twice about capital spending decisions and temporarily put investment decisions on hold. These uncertainties weighted heavily on sentiment with all US markets officially entering correction territory (a fall of 10% of more) at some stage during the quarter. America’s tech mega caps (the Magnificent seven) have officially entered bear market territory, plunging more than 20% from their Christmas Eve highs. A stark contrast from their AI fuelled dominance over the last two years, potentially sighting a broadening of equity returns globally. Despite this, the Federal Reserve opted to hold interest rates steady, though Chair Jerome Powell hinted at possible cuts ahead.
In contrast, for the first time since the second quarter of 2022, European and UK markets outperformed the US, and gold had its best quarter since 1986. In Europe, a decisive fiscal response helped lift investor confidence. The European Commission unveiled nearly €800bn in new spending, with a significant portion earmarked for defence. Meanwhile, Germany’s incoming chancellor Friedrich Merz proposed a bold €500bn infrastructure plan, shocking markets but boosting equities. The European Central Bank (ECB), supportive of increased spending, cut interest rates twice, with further reductions expected.
UK markets proved resilient despite a late-quarter announcement of £8.4bn in spending cuts. UK equities outperformed benefiting from its defensive composition and strong dividend payouts, and gilt yields remained relatively stable. With UK and European markets maintaining a valuation discount relative to U.S. peers, they remain an attractive investment option for a diversified portfolio.
Across Asia, Chinese equities surged 12%, fuelled by optimism around AI advancements and a more accommodative policy stance from Beijing, and Japanese equities faced headwinds from a strengthening yen due to the rising of interest rates.
Diversification has proven effective this quarter, with balanced portfolios navigating market turbulence more successfully than in 2023 and 2024. After two years where market concentration in the ‘Magnificent 7’ made diversification a challenge, the first quarter of 2025 has demonstrated its benefits, rewarding investors with broader exposure across regions and asset classes.
However, as we write this commentary post the end of the quarter the Trump administration announced new policies regarding its relations with trading partners on the so called “Liberation Day”. The breadth and severity of these new proposals shocked markets and provoked a sharp reaction with risk assets selling off further and investors seeking protection in bonds, gold and the Japanese Yen and Swiss Franc. Markets are now looking to Central Bankers to cut rates at a time when inflationary pressures, especially in the US, are heightened once more.
As 2025 progresses, volatility appears set to persist. It’s important to remember that corrections such as we are currently experiencing tend to be indiscriminate, which provides opportunities to invest in great companies at lower levels where we will be able to secure strong long-term returns.
Market Commentary April 2025
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Global markets have experienced a turbulent start to the year. Expectations coming into 2025 were that the new Republican administration in the U.S. would reinforce the dominance of American equities, the reality however has been more complex. The administration’s aggressive trade policies have introduced new uncertainties weighing on US stock market returns that many investors are calling the “Trump Slump”.
U.S. equity markets endured a turbulent quarter, with tariff-related headlines triggering significant swings. Despite a strong January, the US market recorded a negative return of -8% with the technology market falling -11%, making it the worst quarter since Q3 2022 for US stocks. The imposition of new duties on imports from Mexico, Canada, and China in February was followed by further levies on steel, aluminium, and autos in March. Investors responded warily as US businesses thought twice about capital spending decisions and temporarily put investment decisions on hold. These uncertainties weighted heavily on sentiment with all US markets officially entering correction territory (a fall of 10% of more) at some stage during the quarter. America’s tech mega caps (the Magnificent seven) have officially entered bear market territory, plunging more than 20% from their Christmas Eve highs. A stark contrast from their AI fuelled dominance over the last two years, potentially sighting a broadening of equity returns globally. Despite this, the Federal Reserve opted to hold interest rates steady, though Chair Jerome Powell hinted at possible cuts ahead.
In contrast, for the first time since the second quarter of 2022, European and UK markets outperformed the US, and gold had its best quarter since 1986. In Europe, a decisive fiscal response helped lift investor confidence. The European Commission unveiled nearly €800bn in new spending, with a significant portion earmarked for defence. Meanwhile, Germany’s incoming chancellor Friedrich Merz proposed a bold €500bn infrastructure plan, shocking markets but boosting equities. The European Central Bank (ECB), supportive of increased spending, cut interest rates twice, with further reductions expected.
UK markets proved resilient despite a late-quarter announcement of £8.4bn in spending cuts. UK equities outperformed benefiting from its defensive composition and strong dividend payouts, and gilt yields remained relatively stable. With UK and European markets maintaining a valuation discount relative to U.S. peers, they remain an attractive investment option for a diversified portfolio.
Across Asia, Chinese equities surged 12%, fuelled by optimism around AI advancements and a more accommodative policy stance from Beijing, and Japanese equities faced headwinds from a strengthening yen due to the rising of interest rates.
Diversification has proven effective this quarter, with balanced portfolios navigating market turbulence more successfully than in 2023 and 2024. After two years where market concentration in the ‘Magnificent 7’ made diversification a challenge, the first quarter of 2025 has demonstrated its benefits, rewarding investors with broader exposure across regions and asset classes.
However, as we write this commentary post the end of the quarter the Trump administration announced new policies regarding its relations with trading partners on the so called “Liberation Day”. The breadth and severity of these new proposals shocked markets and provoked a sharp reaction with risk assets selling off further and investors seeking protection in bonds, gold and the Japanese Yen and Swiss Franc. Markets are now looking to Central Bankers to cut rates at a time when inflationary pressures, especially in the US, are heightened once more.
As 2025 progresses, volatility appears set to persist. It’s important to remember that corrections such as we are currently experiencing tend to be indiscriminate, which provides opportunities to invest in great companies at lower levels where we will be able to secure strong long-term returns.
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