March 2025 Market Update

After two very positive years, volatility has returned to world stock markets and combined with Donald Trump’s maverick approach to both diplomacy and economics, the last few days have seen more ups and downs than we have been used to.

We need to remind ourselves that this is the nature of stock markets – we expect this – we can go back decades to see that investment returns do not track a straight line and so we should not be surprised when there is a reaction to economic data or political news that creates a flurry on the markets.

Looking at what has contributed to the recent jitters, it’s data; the US economy added 151,000 jobs in February, slightly fewer than the expected 160,000 but nevertheless an improvement on January’s figures. Unemployment rose slightly to 4.1% when it was expected to hold steady at 4%. The Treasury yield in the US dropped too, marking an increase in bond prices.

Then there is “The Donald”. Trump’s tariffs imposed on Canada and Mexico unsettled the markets and the back and forth over this particular strategy has unsettled investors generally. Markets never like uncertainty and this on/off/on/off strategy caused confidence to fall in both manufacturing and amongst consumers who cut back on spending and both of these areas are key to US economic growth.

Elon Musk’s DOGE plan to reduce the size of the federal workforce has produced the largest reduction in federal employment since 2022. Against this backdrop we have also seen Japan experiencing a fall in consumer confidence with the majority of those canvassed expecting price rises.

Closer to home, in Europe, the ECB has cut interest rates to 2.5%. This was no surprise – only one member abstained, and the other members voted in favour. This is good news as borrowing costs for business and households are therefore easing and more cuts are expected in May and June. The ECB has made 6 rate cuts in 9 months and inflation has eased back to 2.4%.

At the time of writing the stock markets in the UK and Europe seem slightly more sanguine with hopes of a ceasefire in Ukraine. Data published mid-week showing lower inflation has begun to calm nerves in the US although concerns about tariffs persist. Above all, we need to remember, as we have said before, that this is what stock markets do.

Here at Acumen Financial we have helped our clients build quality portfolios that over time withstand this sort of short term volatility. The key is to sit tight and whilst Donald Trump’s impact is always fairly high octane and designed to attract attention, we can see for ourselves that businesses worldwide can and do grow their earnings and the prospect for them to be more profitable in years to come means that markets recover.