Markets Last Week - 14/03/2025

Between March 10 and March 14, 2025, U.S. stock markets experienced notable volatility. The S&P 500 and Nasdaq Composite entered correction territory, each declining over 10% from their recent peaks. This downturn was largely attributed to escalating trade tensions, particularly President Trump's announcement of tariffs on imports from Canada, Mexico, and China, which heightened fears of a potential recession. Despite these challenges, the markets showed resilience towards the end of the week. On March 14, the Dow Jones Industrial Average rose 1.7%, the S&P 500 gained 2.1%, and the Nasdaq Composite advanced 2.6%, marking their best day since the previous November. This recovery suggests that while short-term fluctuations can be unsettling, maintaining a long-term investment perspective is crucial.

To put recent market pullbacks into perspective, history has shown that intra-year declines are common, even in years where markets finish strong. The following chart illustrates that since 1990, the S&P 500 has experienced significant drawdowns within most years, yet annual returns have often remained positive:

European stocks faced pressure amid uncertainty over proposed U.S. tariffs. The prospect of higher taxes on European exports has raised concerns over potential economic headwinds. Meanwhile, rising government spending in some regions pushed European bond yields to multi-year highs, further influencing market sentiment.

Key Takeaway:

• Short-term: European markets remain sensitive to trade negotiations.
• Long-term: Maintaining a globally diversified portfolio helps mitigate risks associated with regional political and economic shifts.

The FTSE 100 declined in line with broader market trends, though UK markets have been somewhat more stable compared to the U.S. While inflation remains elevated due to rising energy costs and wage growth, the Bank of England is exercising caution, keeping interest rates steady for now.

Key Takeaway:

• Short-term: UK investors face similar global trade and inflation risks.
• Long-term: The UK economy has demonstrated resilience, and remaining committed to long-term investment strategies is key.

Amid broader market challenges, China’s CSI 300 Index reached its highest level this year, supported by government policy measures aimed at stimulating consumer spending. The Hang Seng Tech ETF also outperformed U.S. tech stocks, offering a potential area of growth for investors.

Key Takeaway:

• Short-term: Government stimulus is boosting investor sentiment in China.
• Long-term: Exposure to global markets provides opportunities beyond U.S. equities, reinforcing the value of diversified investing.

U.S. Jobs and Inflation Data

Several key economic indicators were released this week, providing insights into the strength of the job market and inflation trends:

• Unemployment claims dropped to 220,000, reflecting a resilient labor market.
• Inflation increased 8% year-over-year, suggesting a slowdown in consumer demand for non-essential goods.
• Job openings grew by 232,000, reaching 74 million, with strong hiring in finance and retail sectors.
• Nonfarm payrolls added 151,000 jobs, slightly below expectations but supported by gains in construction and manufacturing.

Key Takeaway:

• Short-term: Mixed economic signals may influence Federal Reserve policy decisions.
• Long-term: A strong job market is a crucial driver of economic growth, and over time, it contributes to market stability and investor confidence.

• U.S. Stocks: S&P 500 and Nasdaq 100 saw further declines.
• Tech Sector: Semiconductor ETFs dropped, though we avoided further losses by reducing our exposure early in the week.
• China Stocks: The Hang Seng Tech ETF held up better than U.S. tech stocks, leading to increased allocations in this sector.
• Bonds: U.S. bond yields declined, but European bond yields surged due to increased government spending.
• Gold: Continued to act as a safe-haven asset, reaching a new record high.

While short-term market movements can be concerning, historical data underscores the importance of remaining invested. Looking at past market drawdowns, we see that despite intra-year declines, markets have tended to recover and deliver positive year-end returns.

This pattern reinforces a fundamental investing principle: staying invested through market downturns leads to long-term growth. Investors who react emotionally and exit the market during downturns often miss the recoveries that follow.

Market volatility is an inevitable part of investing, but history rewards those who remain patient. Attempting to time the market often results in missing the best days of recovery, which can significantly impact long-term returns. The key is to stay invested, stay diversified, and focus on long-term financial goals.

If you have any questions about your investments or market trends, we’re here to help.