Monthly economic and market review: March 2025

The inexorable “march” towards Trump’s “Liberation Day” was all that occupied the minds of investors over the past month. Between all of the president’s tweets and soundbites, which provided no clarity on what to expect from the tariff announcement, market uncertainty was at an elevated level. Markets feared the worst but Trump’s assertion that these were reciprocal tariffs seemed to ease market anxiety just a little. A short relief rally followed but by the end of the month, those gains had all been given back (see the green line of the S&P 500 index in the chart below). Technology stocks led the way lower, and the NASDAQ Composite index ended the month just over 10% down as the “Magnificent Seven” weighed on the market. Meta (-13.7%), Nvidia (-13.2%), Tesla (-11.5%), Amazon (-10.4%), Alphabet (-9.2%), Apple (-8.2%) and Microsoft (-5.4%) all pulled the market lower, leaving the S&P 500 down 5.8% in the month (it’s biggest monthly decline since the 5.8% loss in December 2022). There weren’t too many places to hide in the market but some of the embattled healthcare companies found favour amidst the turmoil, given their traditional defensive nature. Amongst the market sectors, only Energy (+3.75%) and Utilities (+0.06%) finished in positive territory but Healthcare (-1.85%), Consumer Stapes (-2.79%), Materials (-2.90%), REITs (-3.01%), Industrials (-3.72%) and Financials (-4.31%) all outperformed the S&P 500. The underperformers included Consumer Discretionary (-9.02%), Technology (-8.87%) and Communications Services. (-8.35%).

FTSE/JSE All Share Index (blue, RHS) & S&P 500 (green, RHS) – last 12 months

Source: Factset

Investors began questioning the strength of the US economy and its capacity to deal with potentially higher inflation and weakened demand with the imposition of tariffs. The prospect of greater monetary policy easing (lower interest rates), saw the US dollar give up ground and depreciate from $1.04/€ to $1.08/€. The gold price picked up as bullion maintained its status as a hedge against inflation/uncertainty and commodities generally did better in the month. Gold gained almost 10% in March for its best month in 13 years while platinum gained 8.3%, copper gained 5% and coal was up 2%. Iron ore retreated 4% but the better overall commodity prices lifted the gold and platinum counters on the local bourse, helping the FTSE/JSE All Share index to a 3.1% gain in March (see the blue line in the graph above). Without the crutch of the commodities companies in March, the JSE would have been substantially lower. That is evident from the 26% gain in the Resources Index against the 9% decline in Industrials and the 2% decline in Financials. Amongst the large capitalisation stocks, the mining companies made up the top seven gainers in March with positive market moves ranging from the 24% of Gold Fields to the 48% of both Sibanye Stillwater and Harmony Gold. Kumba Iron Ore (-15.7%) and Richemont (-15.1%) were notable decliners in the month but there was broad-based weakness across the local retail sector with Woolworths, Mr Price, Truworths, Foschini, Spar and Dischem all in the red in March (see the appendix below for the winners and losers in the month).

Looking at the market goings on of the last month is purely academic now, given the events of the first few days of April. While the market was anticipating a slightly softer stance on reciprocal tariffs on perhaps only the “Dirty 15” countries with the largest trade surpluses against the US, the reality was quite different. Trump imposed a 10% tariff on all imports into the US and then, based on a simplistically determined calculation of trade barriers, tax and tariffs, he imposed reciprocal tariffs on around 60 countries or regions. The calculation, panned by economists, simply took the trade surplus of each offending country with the US and divided it by US exports to that country and then halved it to determine the tariff rate. It doesn’t appear that tariffs were even included in the calculation despite Trump framing them as “reciprocal”. Based on Trump’s formula, a reciprocal tariff of 30% was levied against South African imports while imports from China were given a 34% tariff and the Kingdom of Lesotho was hit with a tariff of 50%. The tariffs were also presented as being initiated at “the high end” with room for negotiation between the US and each trade surplus country. Some countries have already approached the US to begin negotiating while others have adopted a wait-and-see attitude. The Chinese authorities, however, were not taking the news of tariffs lying down and were quick to retaliate with a “reciprocal” tariff on US imports of 34%. The global trade war had begun in earnest.

The market reacted swiftly and harshly to the 02 April evening Liberation Day” announcement from the White House Rose Garden. In the two days after the announcement, the NASDAQ lost 11.4%, the S&P 500 gave up 10.5% and the FTSE/JSE All Share index lost 8.5%. The US dollar retreated to $1.10/€, the oil price sank to well below $70/bbl. and other commodity prices also fell back sharply. Bond yields declined as investors quickly started factoring in weaker growth and started pricing in the possibility of more interest rate cuts from central banks around the world. Investors headed for the hills as they took risk off the table.

The South African market was pulled down by the collapse of global markets, but domestic issues were also at play. The local bond and currency markets were already a little wary after the postponement of the National Budget in February but with the ANC announcing an agreement on the Budget (and a 0.5% VAT increase from May) outside of the Government of National Unity (“GNU”), market concerns were taken to the next level. Bond yields ticked up and the rand weakened across the board, trading to its worst-ever level against the British pound. With the much-lauded GNU at risk, the market is waiting for the next move from the Democratic Alliance to see the if the GNU will continue in its current form. All this domestic uncertainty on top of all the global tariff mayhem has investors well and truly spooked. There is no clear indication at all where and when the US-induced global trade war will end, the impact it will have on inflation, consumption, growth, interest rates and corporate earnings. Economists and market-watchers are scratching their heads as they rework forecasts and expectations in an environment of little certainty or fact.

As investors ponder what to do, thy should look to the past quarter century for guidance. We have lived through several key market events that are now just blips on a long-term chart. The bursting of the Dotcom bubble, the Global Financial Crisis and the COVID-19 pandemic (and associated rampant inflation) were all very difficult times for investors to live through. The market was crashing around our ears, and the trading screens were filled with red. Selling out amidst the market panic and trying to pick a bottom to get back in again were foolish pursuits. The long-term investor with a diversified portfolio of quality growth stocks that stayed the course, won out over the longer-term. These types of markets do bring strategic opportunities to buy quality stocks at cheaper prices and valuations and these opportunities should be taken to further improve the quality of one’s portfolio. Reacting emotionally or acting on headlines or media noise should be resisted at all costs. Investors should stay the course, all the while looking out for those unique opportunities when quality goes on sale. Often, the recovery is long and a bit of a grind, but the long-term result is always rewarding.

Appendix: Market Movers