Trade Tensions Rattle Developed Markets

Developed market (DM) equities fell for a second consecutive month in March (MSCI World -4.4% m/m), pushing Q1 returns into negative territory (-1.7% q/q). U.S. equities underperformed, with mega-cap tech stocks leading declines (Bloomberg Mag 7 Index -10.2% m/m, -16.0% YTD), as escalating tariff tensions weighed on sentiment. President Trump confirmed new tariffs on Canadian, Mexican, and Chinese imports, culminating in a 25% levy on all imported vehicles. Investors braced for further trade actions on April 2 (“Liberation Day”), reflecting growing unease over potential economic fallout from the administration’s protectionist agenda.

Europe Steadies While Value Stocks Make a Comeback

European equities outperformed U.S. peers for a fourth month (Euro Stoxx 50 flat m/m in USD; S&P 500 -5.6%). Value stocks (MSCI World Value -1.3% m/m, +5% YTD) outperformed growth (MSCI World Growth -7.5% m/m, -7.7% YTD), reversing a multi-year trend. Fiscal stimulus announcements in Europe — including the EU’s proposed €800bn defence package and Germany’s €500bn infrastructure plan — lifted growth expectations but pressured bond markets, with German Bunds down 1.6% for the quarter.

Emerging Markets Shine Amid Commodity Surge

Emerging market (EM) equities outperformed developed markets in Q1 (MSCI EM +0.5% m/m, +3.0% YTD), supported by Chinese, Indian, and Brazilian equities. Investor optimism was buoyed by signs of policy support in China and improved sentiment toward its tech sector. Commodities led Q1 performance, supported by a 19.0% YTD surge in gold (+9.0% m/m), which breached the US$3,000/oz mark. Platinum group metals also rallied, with rhodium rising 21% m/m.

Fed Stays Cautious as Dollar Weakens

U.S. Treasuries were flat in March, with the 10-year yield ending unchanged at 4.2%. Despite inflation concerns linked to tariffs, the Fed held rates steady and signalled a cautious outlook. Treasuries returned 2.9% for the quarter. The U.S. dollar weakened for a second month (DXY -3.2% m/m, -2.1% YTD), supporting EM assets.

SA Holds Steady as Commodities Boost Miners

South Africa’s (SA) inflation remained subdued in February (Headline CPI +3.2% y/y), allowing the South African Reserve Bank to keep rates unchanged. Despite global risk-off sentiment, the local 10-year yield held steady at 10.6%. Global gains in commodity prices supported SA equities (FTSE/JSE All Share +3.14% m/m, +5.4% YTD), though performance was concentrated in mining stocks. Gold (+33% m/m) and platinum (+40%) miners stood out, while the broader index constituents delivered negative returns. Broader weakness in the U.S. Dollar supported a +2% m/m and 2.8% YTD gain in the rand.