March 2025 Market Report
The beginning of 2025 has been volatile, particularly given the relatively robust and steady returns long-term investors have benefitted from in recent years.
While we don’t expect a sudden resolution to the issues concerning markets, namely US trade policy uncertainty, we are resolute that a balanced portfolio, diversified across asset classes and geographies, is best positioned to weather market turbulence.
As always, please reach out to your adviser should you wish to discuss the recent volatility in more detail.
Please click here to read our market report as a PDF.
Global Markets
Markets primarily spent the first quarter of 2025 forecasting and reacting to policy announcements from the new US administration. Equity markets rallied strongly into the inauguration of President Donald Trump on the assumption his promise of sweeping tariffs would encourage domestic investment, reshore jobs and ultimately herald a new age of US exceptionalism.
While tariffs may achieve President Trump’s domestic objectives, market attention has squarely shifted to the flow-on effects of the interventionalist trade policy, namely retaliatory measures from trade partners, the risk of inflation reigniting and the broader prospect of a global economic downturn.
At the US Federal Reserve’s March meeting, the board kept its funds rate on hold at 4.25-4.50%. Chairman Jerome Powell noted that the US administration is implementing “significant policy changes” and “uncertainty around the changes and their effects on the economic outlook is high.
The capricious trade policy is also beginning to concern US households and businesses. Per the University of Michigan survey of consumers, long-run expectations for inflation are comparable to mid-2022, where inflation peaked at 9.1%. Put simply, consumers are scared tariffs are going to increase the cost of goods and are therefore withholding spending.
Equity markets have moved decisively to price in the uncertainty, with the S&P 500 down by 5.75% and the Nasdaq sliding 8.21% in March. Market volatility reached the 89th percentile, highlighting investors’ skittishness.
Significant downward moves like these are uncomfortable. Emotions take hold when market sentiment is low, and this is only exacerbated by the real-time accessibility we have to news headlines and our portfolio. In times like these, it’s important to focus on the long-term rather than the daily, weekly or even monthly market movements. The US equity market has returned 12.5% annually for the past ten years. To put that in context, a $1 million investment would be worth $3.24 million today, even after this month’s falls.
Data Source: S&P
It's also worth highlighting that while US markets may currently be volatile, there are regions and asset classes that are performing strongly. Fixed-income markets have gained 2.63% this year and minimized the impact of US equity market volatility.
The Hang Seng index is up 15.25% due to improving investor confidence and Chinese fiscal stimulus. At the annual Two Sessions conference, where both the legislature (National People’s Congress) and its political advisory body meet, Beijing announced its budget deficit would increase to 4% of GDP in addition to various special bonds for housing, national security, and infrastructure investments.
The DAX 30 has increased by 11.32% this year on the back of a new German government lifting its debt ceiling and announcing a €500bn infrastructure investment package. The UK FTSE has also gained 4.5%
European markets reacted positively after the European Central Bank reduced interest rates by 25 basis points in March to 2.5%. Later in the month, inflation data came in at 2.2%, within touching distance of the central bank’s 2.0% inflation objective, thereby increasing the likelihood of further rate cuts.
This is why we advocate for prudent diversification within a portfolio. When one asset is underperforming, different asset classes or regions help minimize market volatility. As always, please reach out to your adviser if you would like to discuss the recent volatility in more detail.
Australia Markets
March was an eventful month, with Australian markets following the lead of the US in addition to several key economic releases.
The ASX/200 benchmark market fell for a second consecutive month, declining 4.02% in March. Including dividends, that decline reduced to 3.39%. In 2025, the benchmark is now down 2.8% however, it had edged out a small gain over the 12 months.
Investors should keep in mind the local market has performed exceptionally well for an extended period, and that bouts of volatility should not cloud the gains of previous months and years.
The ASX has turned 13.24% over the past five years and 7.15% over the past decade. In money terms, $1 million invested in 2015 is worth just shy of $2 million today. Offsetting some of the equity falls were fixed income, with Australian 10-year Government Bond yields falling slightly from 4.38% to 4.30%.
Gross domestic product (GDP) increased 0.6% in the final quarter of 2024, buoyed by an uptick in migration, household demand and government spending. Annual growth for the past calendar year finished at 1.3%, below the long-run average of 2.7% and short of the 2.25% expected by budget estimates next financial year.
Productivity remains the central sticking point, with labour costs rising 2.3% over the past year despite a 0.7% reduction in GDP per capita. In other words, employees are more expensive but produce less. Consequently, private-sector investment has plateaued over the past 12 months. Should the economic growth pick up, employers need to be confident investment will translate into output.
The monthly consumer price index fell to 2.4%, below the central bank’s midpoint inflation objective of 2.5%. Underlying inflation also fell to 2.7%, recording its third straight month within the central bank’s target band. While still early, the trend should give the RBA confidence that cost pressures have largely abated and the central bank can shift its focus towards economic growth. In the interest of timeliness, the RBA held rates at 4.1% on April 1.
Before Prime Minister Albanese announced an election for May 3, the Federal Government released its Federal Budget for 2025. The primary focus was the cost of living relief, with key policy announcements including:
Reducing the tax rate for low-income earners. From 1 July 2026, the tax rate for the $18,201 to $45,000 band will reduce from 16% to 15%. In the following financial year, it will fall to 14%
Extending energy bill relief until the end of 2025, with each household to $150 in two quarterly instalments
The $150 energy bill relief will also be extended to eligible small businesses
A 4.7% increase to Medicare levy low-income thresholds
Lowering the maximum co-contribution for medicines on the Pharmaceutical Benefits Scheme from $31.60 to $25.00, with the rate for pensioners to be frozen at $7.70.
Reducing all outstanding Higher Education Loan Program (HELP) and other student debts by 20%
A ban on all non-compete clauses for employees who earn less than $175,000, in addition to other anti-competition measures
After delivering two successive surpluses, the budget is now in deficit for the foreseeable future. Estimates expect a $27.6 billion (1% of GDP) deficit for 2025, with deficits growing in future years. Government debt is expected to remain steady at 21 to 24% of GDP.
Gold prices again reached US$3,000/oz as ongoing trade policy uncertainty permeated demand for “safe haven” assets. The ASX Gold Index increased 12.2% in March and is up over 30% this year. Oil prices increased by 1.6% after OPEC+ tapered previously announced supply cuts.
The Australian Dollar traded in a narrow range throughout March, reaching a high of US$0.638 before settling at US$0.625. The currency squeezed out a small gain against the US Dollar, Japanese Yen and Chinese Yuan, however, fell materially against both the Pound and Euro.
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