1st Quarter 2025 Market Update

I hope that this contact finds you well and enjoying some sunshine until the Bank Holiday weekend, so it seems.

You may recall we had wonderful weather 5 years ago in lockdown around this time of year and how history has repeated itself. 

That first quarter of 2020 was very volatile with the Covid pandemic taking grip, we then had Ukraine and Russia in 2022 and now we have Trump in 2025. It seems that these first quarter events keep reappearing, given this time around its mainly Trump creating the issues. 

Trade talks will progress, and deals will be done. With the US economy now shrinking for the first time since 2022 Trump is now under the microscope. The pressure seems to be more toward the US Fed and Trump’s determination for rates to not only be cut, but slashed. 

It’s expected to see rate cuts in the UK so savings rates and mortgages should come down in line with these. 

See the comments below for the quarter, and as always, feel free to get in touch if you have any questions or want us to assist in any way.

US

The US stock market had a rough ride this quarter. Big-name tech and consumer companies took a tumble, while energy and healthcare held things together a bit better.

One big shakeup? A Chinese company, DeepSeek, dropped a cheap AI model that’s almost as good as the big players. That made investors second-guess just how bulletproof US tech dominance really is—especially with the “Magnificent Seven” stocks already riding high.

And then there were the tariffs. Trump’s back at it, slapping tariffs on countries like Mexico and Canada, and on items like cars and steel. 

Add in job cuts from a new department (with the not-so-reassuring name of the Department of Government Efficiency), and no surprise: US consumer confidence dropped hard. People aren’t feeling super upbeat.

The Fed (the central bank) kept interest rates steady but said growth will slow and inflation’s ticking up. So, mixed signals all around.

Europe

Europe, on the other hand, had a good quarter. Germany’s elections brought in Friedrich Merz, and he didn’t waste time—he’s loosening borrowing rules and promising to spend big on defense and infrastructure. Markets loved it.

Bank stocks were the stars since they’re less worried about tariffs and had solid earnings. 

Other winners: industrials and utilities. Tech and real estate? Not so much.

Germany’s business mood improved, and eurozone manufacturing showed signs of life for the first time in two years. Inflation cooled a bit too, and the European Central Bank cut rates twice. 

UK

Big UK companies did ok – especially financials, energy, and healthcare. But smaller UK businesses? Still dealing with economic uncertainty.

Sure, the UK barely dodged a recession last year, but recent government spending cuts didn’t help confidence. There’s talk that taxes might have to go up again later this year. Retailers, homebuilders, and travel companies struggled, and tech didn’t fare much better. 

At least the pound bounced back a bit after a rough January.

Japan

Japan’s markets ended the quarter in the red. Big exporters and tech names were hit hardest—no thanks to tariff fears and worries the US might slow down.

But banks and other financials did okay, helped by rising interest rates and positive inflation data. Warren Buffett’s company even bought more shares in Japanese trading firms, which gave things a bit of a boost.

Also, there’s been more action on corporate reform lately activist investors showing up, more management buyouts etc. So, not all bad news.

Emerging Markets

Emerging markets beat the US, though they didn’t do as well as Europe.

Eastern Europe (think Poland and Greece) did great, riding the wave from Germany’s new spending plans. China also had a good quarter—its new budget-friendly AI model and some fresh stimulus really helped.

Brazil’s currency got stronger, and its central bank hiked rates a few times. South Africa also did well, though it cut rates instead. Mexico was lucky that some US tariffs got delayed.

On the other hand, India, Taiwan, and Southeast Asia had a tough time—mostly due to growth worries and more tariff fears.

Asia (ex-Japan)

Asia outside of Japan had a decent quarter. China led the pack, thanks to government support and excitement over AI. Even Hong Kong saw some gains.

But Taiwan had a rough one—investors got nervous about potential US tariffs on semiconductors and slower AI spending from big US tech firms. India also stumbled due to trade war fears and economic slowdown signs.

Thailand and Indonesia? Double-digit losses.

Bonds

Bonds were all over the place. Europe saw yields shoot up (which means prices dropped) after Germany announced a giant infrastructure fund. It was the biggest bond move there since the 1990s.

Meanwhile, US bonds did well, with yields dropping as investors worried about a potential recession.

Corporate bonds in US dollars outperformed those in euros, whether they were top-tier (investment grade) or riskier (high yield).

In the UK, slow growth and budget worries kept things murky. Japan’s bond yields rose too, thanks to better growth numbers and inflation.

China, on the other hand, stayed cool and deflationary.

Commodities

Gold had a great quarter—investors ran to safety with all the market drama. Silver tagged along too.

Agriculture was a mixed bag. Cocoa prices fell hard, but coffee and sugar rose. Energy had a strong quarter, especially natural gas. Copper surged in the industrial metals group, while zinc was the only real letdown.