Written by Millan Chauhan

We saw a continued sell-off in global equities last week, which was driven by weaker performance from US Equities. The MSCI ACWI index declined -1.8% in GBP terms, largely caused by fears of a growth slowdown following President Trump’s erratic trade policies. After the closing bell last Thursday, the S&P 500 entered correction territory, which is defined as a 10% decline in the value of an index from its peak. This was the seventh fastest correction in history for the S&P 500 index. The sentiment towards the US has weakened and investors have grown increasingly concerned that Trump’s aggressive and somewhat unpredictable trade agenda will impact the US’ forward economic growth expectations and has amplified recessionary fears. Tariffs have been one of Trump’s major policy objectives and he has imposed a sweeping 25% tariff on all steel and aluminium imported into the US. This policy is aimed at supporting the US manufacturing sector but, by bumping up the price of imports, this could initially lead to a resurgence in inflation and could increase the prices of a broad range of consumer and industrial goods. In addition, Trump threatened to impose a 200% retaliatory tariff on alcohol imports from the EU.

Elsewhere in the US, we did see a key inflation measure, the Consumer Price Index (CPI) cool slightly to 2.8% on a year-over-year basis, which was slightly below expectations. On a year-to-date basis, the S&P 500 Index of US Equities has declined -6.8% in GBP terms whereas other equity asset classes such as UK Equities, Japanese Equities and European Equities have held up much better.

At the same time, we have seen strong performance from global listed infrastructure assets and commodities. The S&P Global Infrastructure Index rose by +1.6% last week and is an exposure with embedded inflation linkage via exposure to regulated utilities. Last week, the Bloomberg Commodity Index also returned +0.2% and is a gentle reminder why we believe diversification across regional equities, asset classes and investment styles is critical to your clients’ portfolios.

European equities, as measured by the MSCI Europe ex-UK Index, fell -1.3% in GBP terms over the week but remains up double digits year-to-date.  European banks have performed well and, more recently, we have also seen European defence companies such as Rheinmetall, Leonardo and Thales rise sharply following the EU’s commitment last week to boost its defence spending by €800 billion. This commitment is in response to supporting Ukraine but also is aimed at boosting Europe’s military capabilities, should the US not support Europe. However, overall, we have yet to see European profit forecasts accelerate, in fact they have come down a bit this year. As a result, the recent market appreciation in Europe has only served to make the market more expensive, already trading above its historical average levels.

Last week, the MSCI China index fell marginally by -0.1%, but we saw Chinese markets react positively to Beijing’s promise of new measures aimed at supporting consumption. Consumption within China has been very weak for some time, with consumer prices dropping in February by -0.7% on a year-over-year basis. This also marked the 25th month of Chinese CPI inflation being below 1% and was the largest fall in consumer prices for 13 months. However, the emergence of DeepSeek has led to an uptick in Chinese technology earnings expectations, and the region has been one of the better-performing regional equity asset classes this year, returning +16.5% in GBP terms.

 

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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 17th March 2025.

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