1Q 2025 Market and Economic Overview

After the November 2024 US election, markets initially responded with cautious optimism, but a correction at the end of December was followed by a volatile first quarter. On 20 January 2025, the new US administration signed a series of executive orders covering immigration, energy, trade and the structure of the federal government. Positive data in January and early February, including strong corporate earnings and stable inflation, supported markets. By mid-February sentiment had shifted as consumer confidence weakened, employment data pointed to a cooling US labour market, and tariff announcements covering, among other goods, auto imports, semiconductor chips and pharmaceuticals triggered a market correction.

A cycle of policy announcements, reversals and modifications made planning difficult for businesses, and efforts to renegotiate trade agreements prompted retaliatory measures from key trading partners. The European Union said it would not accept unilateral tariffs without retaliation and raised the possibility of countermeasures, including taxing large US digital businesses. European countries were described as moving towards greater policy coordination, and new trade agreements among US allies were said to have cushioned European markets.

In US equities, the S&P 500 fell approximately 4.6% in the first quarter, reflecting concerns about stagflation and the impact of tariffs on goods such as steel and aluminium. Large technology companies recorded significant losses on fears of a trade war, and the Russell 2000 small-cap index was down 9.8% year to date. Outside the US, European markets outperformed, with the FTSE 100 and the Stoxx Europe 600 both posting gains. Japan's Topix declined, and Indian equities were broadly unchanged.

In fixed income, US Treasury yields declined as investors sought safe-haven assets, US high yield came under pressure on recession fears and concerns over corporate earnings, the European Central Bank considered further easing because inflation was lower than expected, and emerging market bonds performed unevenly. Gold rose to a record high. The US dollar fluctuated with trade announcements, while the Japanese yen and the Swiss franc appreciated as safe-haven currencies.

Important information: This snapshot summarises MWC Group's market commentary for the period shown and is provided for general information only. It is not investment, tax or legal advice, a personal recommendation, or an offer or solicitation to buy or sell any investment, and it does not take account of your personal circumstances. Views and figures reflect conditions at the date of publication and may since have changed. Past performance is not a reliable indicator of future results. The value of investments and any income from them can fall as well as rise, and you may get back less than you invested. Exchange-rate movements can affect returns. Market data comes from third-party sources believed to be reliable, but its accuracy cannot be guaranteed. Please seek personal advice before making any investment decision. Issued by Manentia Wealth Consulting Group Limited (C80087), licensed by the Malta Financial Services Authority.