Investment update - March 2025
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Published on 24 Apr 2025In March 2025, global markets dropped sharply as investors reacted to US President Donald Trump’s sweeping new tariffs. Though formally announced in early April, the market reaction began earlier, with the S&P 500 falling 5.8%. The new policy introduced a minimum 10% tariff on all US imports, with much higher rates for countries like China, Japan and the EU. Many nations have responded or plan to respond with reciprocal tariffs, fueling fears of a global trade war and recession. JP Morgan now puts the odds of a global recession at 60%, although Trump has since announced a temporary 90-day pause on higher tariffs on 9 April.
In Australia, the ASX 200 fell 4.0%, following sharp drops across developed markets. The Reserve Bank of Australia held interest rates steady at 4.10%, as expected, and noted the risks from global economic uncertainty. Despite a cautious tone, markets now anticipate up to three rate cuts in 2025. Australian bonds fell slightly, while inflation continued to ease. Most economists believe Australia can avoid recession despite the global uncertainty.
In Europe, the European Central Bank cut rates to 2.5% amid soft growth and slowing inflation, and further stimulus is expected. The Bank of England maintained its interest rate at 4.5%, following a 0.25 percentage point reduction in February. Meanwhile, China faces increasing pressure as tariffs escalate, prompting expectations of further economic stimulus. If the trade war continues or intensifies, global recession risks will remain elevated.