Monthly Review - March 2025
- 02 April 2025 (5 min read)
In brief
The markets
-5.8%
-4.0%
-1.6%
-3.9%
-1.7%
-1.6%
-2.6%
-1.9%
-0.9%
Source: Bloomberg 31.03.2025, returns in local currency
Top stories
Trump bump or Trump dump?
Sentiment swung further away from the euphoria seen after Donald Trump’s election. Uncertainty remained rife over tariffs, including proposed secondary tariffs, ahead of the announcement of reciprocal tariffs on all trading partners on ‘Liberation Day’ in April. The president spoke of a “period of transition”, quickly interpreted as impending US recession and markets took fright. Crowded trades, such as long positions in US equities or the US dollar, were closed in a hurry. Meanwhile, positions betting on falling European and Chinese equities were swiftly unwound. Investors cried out for the ‘Trump put’, or stimulus that could boost the markets. No sign as yet.
US exceptionalism challenged
Chinese stocks touched a year high, as China announced new growth targets and plans to “vigorously boost” consumption. Elsewhere, Germany approved a €1 trillion ($1.08 trillion) spending plan, removing the government debt brake and raising the possibility of “limitless” spending on defence. The 10 year Bund yield jumped in anticipation of this stimulus to growth, the biggest one day move since German reunification. Meanwhile in the US, Jay Powell of the Federal Reserve noted increased uncertainty and sharp declines in sentiment. And Treasury Secretary Scott Bessent called for a “detox period”, after consumer confidence saw its biggest drop since the pandemic.
BYD leads the charging
The share price of BYD hit a record high. The Chinese electric vehicle (EV) giant claimed its latest charging technology can deliver a full top up in five minutes, putting EV charging on a par with petrol station refuelling. Meanwhile, Tesla shares fell over 50% from their December peak, driven by negative sentiment towards founder Elon Musk. Hedge funds have made an estimated $16 billion by betting against the stock in the last three months. The sharp drop prompted unusual scenes on the White House lawn, where Tesla cars were on show, as the president promised to buy one himself.
Energy transition out of favour
Green energy stocks have fallen to levels last seen five years ago, amid growing uncertainty over political support for the transition away from fossil fuels. In the US, Donald Trump has frozen funding for green projects, withdrawn the US from the Paris Climate Agreement and is encouraging oil and gas producers to “drill, baby, drill”. The EU, meanwhile, has weakened the Corporate Sustainability Reporting Directive’s reporting requirements. Nonetheless, Germany’s decision to relax its debt brake, an outcome only secured due to the backing of the Green party, should result in much needed investment to expand the country’s climate neutral energy infrastructure.
On the radar
Donald Trump’s erratic approach to tariffs will likely continue to sow uncertainty. Negotiations between the US and its major trading partners, following the “Liberation Day” announcements of reciprocal tariffs on April 2, will be closely tracked.
Concern is set to grow that US economic momentum is waning in the face of higher tariffs and federal job cuts. The likelihood of a US recession has risen to 40%, from 30% at the start of the year, according to one major US investment bank.
Hopes of an end to the three year war between Russia and Ukraine grew after a maritime ceasefire was announced by the US after peace talks in Saudi Arabia. However, the Kremlin claims this will only happen once sanctions on a number of Russian banks are lifted.