By Jan Faure
Equity markets declined in March as concerns over the economic impact of a global trade war weighed on sentiment. It draws to an end a tumultuous quarter for financial markets, particularly in the US. Market volatility was fuelled by additional US tariffs set to take effect beginning of April. President Donald Trump sees tariffs as the most effective tool to rebuild US manufacturing and even the trade playing field.
For the month, the S&P 500 declined 5.8% while the tech-heavy Nasdaq Composite suffered a sharp 8.2% drop. For the quarter, the two major US indices were down 4.6% and 10.4% respectively. Defensive sectors (utilities, staples, energy) have outperformed large-cap tech stocks year-to-date as investors positioned for unprecedented policy uncertainty. Q1 earnings season begins second week of April and will be closely watched for signs of any change in company earnings projections and capital spending.
In bond markets, US treasury yields have declined year-to-date as investors have sought safe-haven assets amid growing concerns over the US economic outlook and the impact of escalating trade tensions. Despite lower yields signalling Fed rate cuts ahead, the Fed may find it difficult to ease policy rates due to a sharp rise in inflation expectations stemming from tariffs concerns.
In Europe, the Euro Stoxx 50 declined 3.9% for the month as escalating trade tensions impacted sentiment. For the quarter, the index advanced 7.2% as lower interest rates, cooling inflation and fiscal spending plans offered support for the European economy. European equity markets have emerged as an attractive alternative to the US amid optimism over the Eurozone’s fiscal plans, including increased defence spending (particularly from Germany).
China’s CSI 300 dipped 0.1% as tariffs concerns overshadowed strong manufacturing data and optimism over economic stimulus measures. Hong Kong’s Hang Seng index advanced 0.8% in March, the fourth consecutive positive month, led by high-growth technology companies. The Hang Seng’s strong rally year-to-date (+15.3%) has been driven by demand for tech stocks after Chinese startup Deepseek proved that advanced AI models can be developed more cost-effectively.
In Japan, the Nikkei 225 fell 4.1% for the month led by a sell-off companies exposed to US tariffs, particularly the auto and industrial sectors. Despite some positive domestic economic data, the Japanese equity market remained under pressure from upcoming US tariffs on Japanese car exports and weakness in manufacturing activity. Notably, on the 30th March, Japan, South Korea, and China held their first economic dialogue in five years to facilitate regional trade in the wake of Trump’s tariff announcements.
The increased market uncertainty has benefited gold investors. Bullion surged to a fresh record high of around $3,160 per ounce in March (+19% YTD) as investors were drawn to gold’s safe-haven qualities. Gold has benefited from strong central bank buying and rising inflation expectations.
GOLD: 1 Year (source: Trading Economics)
Overall, market sentiment remains fragile as investors await further clarity on trade policies and inflationary risks. As markets navigate ongoing trade uncertainty and macroeconomic headwinds, we continue to expect volatility to remain elevated in the short term. With heightened volatility comes the opportunity for investors, with a long-term investment horizon, to buy quality companies at more reasonable valuations.
Table 1: Global Indicators – Local reporting currencies
