March 2025 Market Commentary
March 21, 2025 | Luke WrightLuke WrightGlobal markets displayed mixed performance from December 2024 to February 2025, shaped by various macroeconomic factors, adjustments in monetary policy, and geopolitical developments. Similarly, UK markets experienced a range of outcomes during this period, influenced by economic challenges, monetary policy shifts, and overarching global uncertainties.
During this period, the FTSE 100 showed resilience. However, this optimism was tempered in early 2025 as political uncertainties regarding key domestic policies increased market volatility. In February, the Bank of England reduced interest rates to 4.5%, halved its UK growth forecasts for the year, and cautioned that households would face renewed pressure from rising prices.
Equities across Europe also exhibited mixed performance, as those of its continental peers offset the UK’s results. The STOXX 600 lagged, hindered by weak industrial output and adverse fluctuations in energy prices. The outlook in North America seemed more optimistic, buoyed by strong holiday spending supporting tech-heavy indices like the Nasdaq.
However, US markets began to show signs of fragility in early 2025 amid growing concerns regarding the Federal Reserve’s hawkish stance. Asian markets were mixed; while China’s recovery displayed strength, Japan’s Nikkei index struggled due to challenges from higher bond yields.
The bond markets reflected cautious investor attitudes globally. UK gilt yields rose slightly in December, tracking inflation concerns, but stabilised thereafter as economic data indicated slower growth ahead. European bonds generally faced upward yield pressures as the European Central Bank maintained a tight monetary policy amidst persistent inflation. Conversely, US Treasury yields surged early in the period due to strong labour market data but settled in January on expectations of economic cooling. Emerging market bonds showed modest gains, attracting interest from yield-driven investors recovering from earlier bearish sentiment.
Commodities exhibited varied performance during the period. Crude oil prices rallied in December, supported by strong holiday travel demand and OPEC+ production cuts. However, energy markets turned cautious by February as fears of slowing global demand weighed on sentiment. Gold continued to act as a safe haven, with its price advancing amidst geopolitical tensions and market uncertainty. Industrial metals saw an initial bounce due to Chinese demand recovery but later eased as global economic activity showed signs of moderation.
Looking ahead, global markets remain delicately balanced. The interplay of opportunities in sectors such as technology and energy efficiency, coupled with challenges like persistent inflation and sluggish economic growth, will be critical. For the UK, investor sentiment may hinge on clearer economic policy directions from the government and further insights from the Bank of England.
Internationally, markets may gain additional clarity in the coming months from central bank actions and ongoing developments across Europe and Asia, indicating a cautious yet strategic approach for investors navigating these uncertain conditions.
