Market Overview March 2025 & outlook ahead
February’s weakness continued into March, driven by a massive increase in economic and political uncertainty associated with trade and tariff wars. The Trump administration has indicated that “liberation day” is April 2nd, and markets have moved accordingly. The narrative change saw the greatest negative reaction across growth equities and richly priced US shares.
Gold continues to benefit from “de-dollarisation,” with strong buying from central banks, institutions and retail investors alike. While we think the gold price has moved into “bubble territory,” there is no denying the current appetite for the shiny metal.
Europe’s response to Trump’s tariffs and the war in Ukraine will see a material uplift in government spending, which will bolster employment and output and likely spill over into corporate profits.
Fixed income performed well throughout the month and quarter, with yields generally decreasing across the board. Credit spreads remained near their lows, suggesting that the recent unwinding over the past three months has primarily been driven by momentum factors, a decline in Growth stocks (aggravated by the rise of China’s DeepSeek), and a phenomenon centered in the United States.
Global shares
India’s primary stock exchange was resilient, ending the quarter with only a slight decline. Financial institutions in this market have shown robust performance, trading at significantly lower multiples compared to other sectors while benefiting from structural growth through banking previously unbanked populations and expanding credit availability to rapidly growing or higher-income households.
Australian shares
Turning to the local market, the winners over the past month and quarter were almost uniformly gold companies.
Whilst the winners had a clear theme, the month’s worst performers were a diverse group. James Hardie’s acquisition of AZEK was poorly received by investors, who viewed it as overpaying for a lower-quality building products company. Uranium miner Paladin has been plagued by production problems at the Langer Heinrich mine, amongst generally soft prices for yellow cake. Car accessories company ARB sold off in line with concerns over tariffs (the US is proposing 25% tariffs on imported cars). In most instances, the high valuation multiples that many of the below companies traded on was arguably the dominating factor, in a month in which growth equities underperformed.
Investment Outlook
US macroeconomic data is slowing, affecting various sectors, nominal GDP growth estimates, housing (where new sales continue to hit cycle lows), and the labor market, evidenced by rising initial jobless claims. This decline in confidence is also apparent in survey comments from Chief Executives citing trade and tariff disputes initiated by the Trump administration. This has intensified rapidly since April 2nd, and the introduction of significant new tariffs on numerous countries, even those without any pre-existing tariffs.
US Chief Executive Group, CEO Confidence Index
The news regarding the “April 2nd Trump Liberation Day” is unlikely to significantly bolster confidence in the near to medium term. Additionally, the U.S. central bank, the Federal Reserve, is not expected to reduce interest rates immediately to counteract this growing weakness in economic activity. This is because the Fed perceives tariffs as “self-inflicted” wounds and thus serves as a teachable moment for the U.S. administration.
Current market weakness provides direct feedback to the US administration that they should consider alternative strategies to revitalise American manufacturing or reduce trade deficits.
At times like these, portfolio diversification provides flexibility to add to cheaper investments while defensive assets such as cash, fixed income, and, to a lesser extent, infrastructure and property can offer relative protection from the industry’s most adversely affected by tariffs.
It is also noteworthy that countries like Australia have significant monetary policy flexibility to reduce interest rates and mitigate any downturn in economic activity related to rising global trade uncertainty. The cash rate futures market anticipates approximately 3-4 rate cuts by March of next year, providing the RBA with valuable firepower to support the Australian economy in the coming months.
EWK Investment Committee
Important information
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither EWK Investment Committee nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement.
