Monthly Market Report – March 2025
March was characterized by a widespread increase in volatility across most markets and asset classes. The impact of tariffs, doubts over U.S. economic growth, and increased public spending in Germany were the main catalysts.
The ongoing comments about new tariffs by the Trump administration took center stage. In addition to reciprocal tariffs to be announced in April, Trump surprisingly announced new 25% tariffs on the automotive sector. Markets started to fear a potential slowdown in the U.S., negatively affecting American equities. The benchmark S&P-500 declined by -5.75% in March, marking its second consecutive negative month. Once again, the so-called "Magnificent Seven" stocks were the hardest hit.
European markets ended their rally, although declines were more moderate compared to Wall Street; indices like the Eurostoxx-50 fell -3.94% in March. Thus, the cumulative performance differential remains favorable to Europe, with the Eurostoxx-50 up +7.20% in 2025 versus the S&P-500’s -4.59%.
Central Banks acted as expected. The European Central Bank cut rates by 25 basis points (the second cut in 2025), bringing the benchmark rate down to 2.50%. Meanwhile, the U.S. Federal Reserve kept its rate unchanged at 4.50%, though it expressed concerns regarding U.S. growth and persistent inflation. Accordingly, the U.S. price index fell to +2.8% from the previous +3.0%.
Despite the ECB rate cut, German yields rose significantly. Germany’s possible new chancellor after February elections has indicated intentions to eliminate existing debt limits. Besides increased defense spending, Germany announced a new €500 billion fund for infrastructure investment. The German 10-year yield reached levels around 2.95%, unseen since October 2023. This upward movement broadly affected other European yield curves, making Euro fixed income a clear detractor of returns this month.
U.S. yield curves were volatile, with the 10-year benchmark closing March at 4.20%, unchanged from February. Markets are uncertain about the Fed’s next steps given the high tariff environment: lower economic growth should imply monetary easing, but rising prices complicate lowering rates.
The EUR/USD exchange rate was another significant factor: it rose to 1.0945 EUR/USD (+5.49%) from February’s 1.0375 EUR/USD, mainly driven by higher European yields.
Geopolitically, uncertainty around the Russia-Ukraine conflict increased. February rumors of a peace deal evolved into formal contacts, but Donald Trump's mediation reduced visibility on their potential success.
Did you find this Monthly Market Report – March 2025 useful? If you’re interested in staying up to date with economic analysis and market trends, we invite you to explore other recent reports on our blog:
- Monthly Market Report – February 2025: Lee más aquí
- Monthly Market Report – January 2025: Lee más aquí
