The first three months of 2025 have been dominated by volatility with politics, conflicts and trade tensions taking centre stage. In his latest market commentary, MPA’s Head of Investment Chris Wheeler explores how this volatility has impacted markets.

As we progress through the first quarter of 2025, global financial markets have experienced notable shifts. After a strong end to 2024, markets have pulled back, with politics, conflicts, and trade tensions taking centre stage and shaping investor sentiment. While volatility has dominated the landscape, opportunities have emerged across various asset classes and regions.

A Tough Start for U.S. Markets

The U.S. stock market has faced significant headwinds, with major indices—including the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average—posting declines. Investor confidence has been shaken by policy uncertainty, trade tensions, high valuations and concerns over a potential economic slowdown. Leading technology stocks, including Tesla, Apple, and Alphabet, have been among the hardest hit, prompting cautious positioning among global investors.

Europe and Asia Lead the Way

In contrast, European and Asian markets have shown resilience. Increased government and defence spending have bolstered European indices such as the Euro Stoxx 50 and the FTSE 100. Meanwhile, Chinese technology stocks have rebounded strongly, buoyed by government support and advancements in artificial intelligence. The Hang Seng Index has surged nearly 20% year-to-date.

Trade & Tariffs

US-China trade relations came under renewed strain early into Trumps Presidency with the US imposing additional tariffs on key Chinese exports, citing national security concerns. With China then announcing countermeasures. However, Trump has turned his focus on his immediate neighbours, Canada and Mexico, all leading to short-term market declines. With the EU now considering protectionist measures to support its own domestic industries and reduce reliance on the USA, particularly in Defence.

Interest Rates & Inflation

Expectations of interest rate cuts that dominated headlines in 2024 are now being tempered with central banks taking a more cautious approach. The US Federal Reserve, while still signalling rate reductions later in 2025, indicated that inflationary pressures remain sticky, delaying immediate action. Similarly, the European Central Bank (ECB) and the Bank of England (BoE) maintained a data-dependent stance, pushing back market hopes of early cuts. This led to increased bond market volatility, with government bond yields briefly rising before stabilising.

Gold Reaches Record Highs

Amidst geopolitical uncertainty and a weakening U.S. dollar, gold prices have soared to record highs, surpassing $3,000 per ounce. Partly driven by continued central bank purchases and reflecting gold’s continued appeal as a safe-haven asset, reinforcing its role in diversified investment portfolios.

Investor Sentiment and Outlook

According to a recent Bank of America survey, global fund managers have adopted a more defensive stance, with cash allocations rising and exposure to U.S. equities declining. Concerns over stagflation—slowing growth combined with persistent inflation—have weighed on sentiment, yet most analysts do not foresee an imminent global recession.

Positioning for the Future

For investors, the start of 2025 underscores the importance of diversification and active portfolio management. As the economic landscape continues to evolve, opportunities remain in resilient sectors and regions, with alternative assets such as gold offering protection against uncertainty.

At SWP we remain committed to helping our clients navigate these uncertain times we find ourselves in. If you would you like to discuss your financial plan, please get in touch.