Executive Summary

Global financial markets experienced a difficult March 2025 as escalating trade-policy uncertainty, weaker US economic indicators and concern about corporate earnings caused investors to reduce exposure to risk assets. US equities recorded substantial declines, while government bonds and gold benefited from increased defensive demand.

The United States imposed new tariffs on imports from China and introduced duties affecting steel and aluminium. Additional measures involving Canada, Mexico, automobiles and a broader range of international trading partners were announced or prepared for implementation.

Investors became increasingly concerned that tariffs could create an unfavourable combination of slower economic growth and higher inflation. Businesses faced greater uncertainty regarding supply chains, capital expenditure, customer demand and their ability to pass increased costs to consumers.

The S&P 500 declined by approximately 5.8% during March and entered correction territory from its February high. The Nasdaq Composite suffered a larger fall as technology, semiconductor and other highly valued growth companies remained under pressure.

The Federal Reserve maintained its target range at 4.25%–4.50%. Policymakers continued to project two quarter-point reductions during 2025, but acknowledged that uncertainty surrounding inflation and economic growth had increased substantially.

The Federal Reserve also announced that it would slow the pace of quantitative tightening from April. The monthly cap on Treasury securities allowed to mature without replacement would be reduced substantially, limiting the rate at which the central bank's balance sheet contracted.

The European Central Bank reduced its deposit rate by 25 basis points to 2.50%. European markets initially benefited from expectations of greater defence and infrastructure expenditure, although global trade concerns caused equities to retreat later in the month.

Germany approved a historic fiscal package that relaxed its constitutional borrowing restrictions for defence expenditure and created a large infrastructure fund. The measures represented a significant change from the country's traditionally conservative fiscal approach.

The Bank of England maintained Bank Rate at 4.50%. Policymakers remained concerned that tariffs, higher energy costs and domestic wage pressure could complicate the inflation outlook.

Gold reached successive record highs above $3,000 per ounce as investors sought protection from trade conflict, geopolitical uncertainty and potential currency depreciation. Oil prices were more subdued as concern about global demand offset supply and geopolitical risks.

Key Themes During March

• Tariff uncertainty became the principal source of global market volatility.
• The S&P 500 recorded its weakest March since 2020.
• Technology and semiconductor shares suffered substantial declines.
• The Federal Reserve held rates at 4.25%–4.50%.
• The Federal Reserve slowed the pace of quantitative tightening.
• The ECB reduced its deposit rate to 2.50%.
• The Bank of England maintained Bank Rate at 4.50%.
• Germany approved substantial defence and infrastructure borrowing.
• Gold rose above $3,000 per ounce.
• Private-market underwriting became increasingly focused on tariffs and recession risk.

Global Economic Overview

The global economic outlook weakened during March as trade restrictions and policy uncertainty affected business confidence. The United States continued to expand, but evidence emerged that households and companies were becoming more cautious.

United States

US consumer-confidence surveys declined, while businesses reported greater uncertainty regarding tariffs, federal spending and the future cost of imported materials. Several measures of expected inflation also increased.

The labour market remained broadly resilient, although hiring momentum had moderated. Household spending continued to support activity but became less consistent as lower-income consumers faced pressure from housing, food and credit costs.

Federal Reserve

The Federal Reserve maintained its target range at 4.25%–4.50% at its March meeting. Policymakers described economic activity as continuing to expand at a solid pace while acknowledging that uncertainty had increased.

The updated projections retained a median expectation of two quarter-point rate cuts during 2025. However, officials reduced their growth forecast and increased their inflation projection.

Chair Jerome Powell described part of the expected tariff-related inflation increase as potentially temporary. The central bank nevertheless remained unable to determine the scale, duration or economic effect of the administration's trade measures.

Quantitative Tightening

The Federal Reserve announced that it would reduce the monthly Treasury redemption cap from $25 billion to $5 billion beginning in April. The cap on mortgage-backed-security runoff remained unchanged.

The decision was intended to reduce the risk that banking-system reserves would decline too quickly during a period of fiscal and debt-ceiling uncertainty.

US Trade Policy

Additional tariffs on Chinese imports took effect, bringing the cumulative increase introduced during the new administration to 20%. Duties on steel and aluminium were also implemented.

The administration prepared broader reciprocal tariffs for announcement in early April. Companies accelerated imports, adjusted inventories and reviewed sourcing arrangements ahead of possible changes.

Eurozone

The eurozone economy remained weak but displayed tentative signs of stabilisation. Service activity was more resilient than manufacturing, while lower interest rates gradually improved financing conditions.

The ECB reduced the deposit facility rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending rate to 2.90%.

President Christine Lagarde stated that monetary policy had become meaningfully less restrictive. Investors interpreted the language as suggesting that the ECB was approaching the later stages of its easing cycle.

Germany

Germany approved constitutional changes allowing defence expenditure above a defined threshold to be exempted from the debt brake. A €500 billion infrastructure fund was also authorised.

The package improved expectations for construction, defence, transport, energy and industrial investment. It also increased projected government borrowing and placed upward pressure on longer-term German bond yields.

France

France continued to face weak growth and difficult fiscal consolidation. Political fragmentation limited the government's ability to implement substantial spending reductions or structural reform.

United Kingdom

The Bank of England maintained Bank Rate at 4.50% by an 8–1 vote. One committee member preferred an immediate reduction to 4.25%.

The Bank highlighted increased global trade uncertainty and persistent domestic wage pressure. UK businesses also prepared for higher employer National Insurance contributions and an increase in the minimum wage from April.

The Office for Budget Responsibility reduced its 2025 UK growth forecast during the Spring Statement, reflecting weak productivity and subdued economic momentum.

Japan

The Bank of Japan maintained its policy rate at approximately 0.5%. Strong wage settlements supported the case for further gradual normalisation, but trade uncertainty created a more complicated growth outlook.

China

China announced an annual growth target of around 5% and confirmed a larger fiscal deficit. Authorities continued to emphasise domestic consumption, advanced manufacturing and technological self-reliance.

Property activity remained weak, while higher US tariffs threatened export growth. Policy support focused increasingly on consumption subsidies, local-government finances and strategic industries.

Global Outlook

The risk of slower global growth increased during March. Tariffs could reduce trade, business investment and household purchasing power while simultaneously increasing selected prices.

Central banks faced a difficult balance. Reducing rates could support growth, but premature easing risked allowing tariff-related inflation to become embedded within wages and expectations.

Equity Markets

Global equity markets declined during March as tariff uncertainty and weaker US growth expectations affected investor confidence. Technology and consumer-discretionary shares experienced particularly substantial pressure.

United States

The S&P 500 declined by approximately 5.8%, while the Nasdaq Composite fell sharply and the Dow Jones Industrial Average lost more than 4%.

US equities completed their weakest quarter since 2022. The S&P 500 lost close to 5% during the first quarter, while the Nasdaq declined by approximately 10%.

Investors reduced exposure to companies with high valuations, international supply chains or substantial dependence upon discretionary consumer spending.

Technology and Semiconductors

Technology shares remained under pressure following the DeepSeek disruption and growing concern about AI capital expenditure. Tariffs and export restrictions added further uncertainty for semiconductor supply chains.

Nvidia, Broadcom and other AI-related companies experienced considerable volatility. Long-term demand for advanced computing remained strong, but market valuations had assumed exceptional and sustained growth.

Software companies also weakened as investors considered whether slower corporate spending could affect subscriptions and cloud demand.

Consumer Discretionary

Consumer-discretionary shares underperformed as confidence indicators weakened. Automobile companies faced particularly significant uncertainty regarding tariffs on vehicles, components and steel.

Retailers dependent upon imported products considered whether higher costs could be passed to customers without reducing demand.

Defensive Sectors

Healthcare, consumer staples and selected utilities generally proved more resilient. Their comparatively stable demand and cash flow attracted investors during the risk-off environment.

Financials

Financial companies declined as recession concerns increased and Treasury yields fell. Banks faced the possibility of weaker loan growth and greater future credit losses.

Capital-market activity remained more supportive, although tariff uncertainty threatened to delay mergers, acquisitions and public offerings.

Europe

European equities initially benefited from expectations of increased German spending and stronger defence investment. Gains subsequently weakened as global trade concerns intensified.

Defence, construction, engineering and infrastructure-related businesses continued to outperform over the quarter. Exporters and automobile manufacturers remained more vulnerable.

United Kingdom

UK equities declined during March. The FTSE 100 was affected by global risk aversion and weakness among internationally exposed companies.

Defence shares remained comparatively strong, while retailers and domestic employers prepared for higher labour costs.

Japan

Japanese equities weakened as the yen strengthened and tariff concerns affected exporters. Automobile and technology manufacturers experienced particular pressure.

China and Hong Kong

Chinese equities were comparatively resilient and produced a modest gain in some benchmarks. Technology shares benefited from continued enthusiasm surrounding domestic AI development.

The threat of additional tariffs and persistent property weakness prevented a broader advance.

Emerging Markets

Emerging-market returns were mixed. Lower US yields provided some support, while trade-sensitive Asian markets faced pressure.

Indicative March Performance

Fixed Income Markets

Government bonds generally advanced during March as investors sought defensive assets and became more cautious about global economic growth.

US Treasuries

US Treasury yields declined as recession probabilities increased and markets anticipated that the Federal Reserve could resume easing later in 2025.

The Federal Reserve's decision to slow quantitative tightening also supported market liquidity and reduced future Treasury runoff.

European Government Bonds

German government bonds experienced unusual pressure after the announcement of the defence and infrastructure package. Expected issuance caused longer-term Bund yields to rise despite the ECB's interest-rate cut.

The move represented a significant change for a market historically characterised by limited German sovereign supply.

UK Gilts

UK gilts benefited from weak growth expectations, although persistent inflation and government borrowing limited performance.

Japanese Government Bonds

Japanese yields remained elevated as strong wage settlements supported expectations of additional Bank of Japan tightening.

Investment-Grade Credit

Investment-grade corporate bonds proved comparatively resilient. Higher-quality issuers benefited from defensive demand and generally strong balance sheets.

High-Yield Credit

High-yield spreads widened as investors increased expected recession and default risk. Companies with weak interest coverage or near-term refinancing needs experienced greater pressure.

Private Credit

Private-credit managers continued providing financing, but tariff uncertainty complicated borrower forecasts. Companies dependent upon imported materials or discretionary spending required more conservative assumptions.

Amendments, payment-in-kind interest and maturity extensions remained important indicators of underlying portfolio stress.

Foreign Exchange

The US dollar weakened during March as growth concerns and falling Treasury yields reduced its interest-rate advantage.

US Dollar

The dollar declined against several major currencies despite tariff uncertainty. Markets increased expectations of future Federal Reserve easing.

Euro

The euro strengthened as Germany's fiscal package improved regional growth expectations and increased Bund yields.

Sterling

Sterling remained comparatively resilient. The Bank of England's cautious approach and the relatively high level of UK rates provided support.

Japanese Yen

The yen strengthened as investors reduced carry trades and anticipated further Bank of Japan policy normalisation.

Chinese Renminbi

The renminbi remained under pressure from higher US tariffs and domestic monetary support. Authorities continued to limit rapid depreciation.

Emerging-Market Currencies

Emerging-market currencies produced mixed returns. Lower US yields were supportive, while trade exposure and domestic politics created substantial variation.

Commodities

Gold was the strongest major commodity during March, while oil and industrial metals remained sensitive to weaker growth expectations and trade disruption.

Gold

Gold rose above $3,000 per ounce and reached repeated record highs. Investors sought protection from tariffs, geopolitical conflict, government borrowing and currency uncertainty.

Central-bank demand remained strong, while lower US yields improved the metal's relative attractiveness.

Oil and Energy

Oil prices traded within a relatively narrow range before weakening near month-end. Concern about global demand offset tighter sanctions and geopolitical supply risks.

OPEC+ prepared to increase production gradually, creating an additional potential source of supply.

Copper and Industrial Metals

Copper remained volatile. Expectations of tariffs encouraged inventory movements, while weaker manufacturing growth limited demand confidence.

Long-term requirements associated with electricity networks, renewable energy and data centres remained constructive.

Iron Ore

Iron ore remained affected by weak Chinese property activity and uncertainty surrounding steel demand.

Agricultural Commodities

Coffee and cocoa remained historically elevated because of supply constraints. Grain markets were influenced by crop conditions and Black Sea developments.

Digital Assets

Digital assets remained volatile during March after the substantial correction experienced in February. Regulatory developments provided support, while risk aversion limited recovery.

Bitcoin

Bitcoin traded within a wide range below its January record. Investors assessed ETF flows, regulatory policy and the possibility of government digital-asset reserves.

US Strategic Reserve

The US administration established a strategic Bitcoin reserve based principally upon digital assets already held by the federal government through forfeiture.

The announcement provided greater policy recognition but did not initially create the large new government purchases anticipated by some investors.

Ethereum

Ether remained comparatively weak as ETF demand remained subdued and competition from alternative networks continued.

Institutional Development

Financial institutions continued developing tokenised securities, custody and settlement infrastructure despite weakness in speculative token prices.

Risk Considerations

• Government reserve policy created less immediate demand than expected.
• ETF flows remained inconsistent.
• Digital assets remained correlated with speculative technology shares.
• Leverage and security risks remained significant.
• International regulation remained fragmented.

Private Equity

Private-equity conditions became more cautious during March as tariffs and declining public markets increased uncertainty surrounding valuations, financing and exit timing.

Deal Activity

Transactions continued within healthcare, business services, defence, infrastructure and specialised technology. Companies with domestic supply chains and recurring revenue attracted greater interest.

Financing

Lower US Treasury yields offered some relief, but widening credit spreads and weaker risk appetite complicated leveraged financing.

German fiscal expansion created opportunities within European infrastructure, defence and industrial services.

Tariff Analysis

Due diligence increasingly examined the origin of components, contractual pricing, customer concentration and the ability to relocate production.

Businesses with low margins or limited pricing power were particularly vulnerable to import-cost increases.

Exits

Declining equity markets reduced confidence in near-term IPOs. Trade sales, continuation funds and secondary transactions remained important alternatives.

Private Credit

Private lenders required more conservative downside cases for tariff-sensitive borrowers. Covenants, liquidity and cash-interest coverage became increasingly important.

CE Global Private Equity Observations

• Tariff exposure became a central due-diligence requirement.
• Domestic and recurring-revenue businesses appeared more defensive.
• German fiscal expansion created European investment opportunities.
• Public-market weakness complicated exits.
• Moderate leverage and liquidity remained essential.

Artificial Intelligence & Technology

Artificial intelligence remained a long-term growth theme, but public-market sentiment deteriorated as investors questioned valuations, spending and the effect of slower economic growth.

Semiconductors

Advanced processor demand remained strong, but semiconductor shares faced pressure from export controls, tariffs and the emergence of more efficient AI models.

Customers continued investing in computing capacity, although markets became less willing to assume unlimited expenditure growth.

Cloud Computing

Cloud providers maintained substantial data-centre plans. Tariffs on equipment and construction materials could increase project costs.

Enterprise Adoption

Lower-cost models improved the potential return from customer-service, coding and document-analysis applications. Companies nevertheless required measurable productivity benefits.

Data Centres and Power

Electricity availability, grid connections and cooling remained important constraints. German and European infrastructure spending could create additional opportunities for equipment and engineering providers.

Technology Risks

• Tariffs could increase hardware and construction costs.
• Export restrictions could reduce international semiconductor demand.
• More efficient models could change infrastructure requirements.
• High valuations remained sensitive to slower growth.
• Regulatory and data-governance obligations continued to expand.

Sector Spotlight

European Infrastructure and Construction

March's sector spotlight examines European infrastructure following Germany's historic decision to increase borrowing for defence and long-term investment.

German Infrastructure Fund

The €500 billion fund was designed to support transport, energy, digital infrastructure, education and other long-term public assets.

Germany had accumulated substantial investment requirements after years of limited public expenditure and strict borrowing controls.

Transport

Railways, bridges and roads required extensive modernisation. Engineering, construction and maintenance businesses could benefit from multi-year project pipelines.

Energy Networks

Electricity transmission, renewable integration and industrial electrification required significant grid investment. Demand was expected to increase for cables, transformers and specialist engineering.

Digital Infrastructure

Fibre networks, public-sector technology and data-centre capacity represented additional priorities. Germany continued to lag several European peers in digital connectivity and administration.

Defence Infrastructure

Higher military expenditure required bases, logistics, communications, maintenance and secure technology in addition to weapons production.

Private-Market Opportunities

• Engineering and construction services
• Rail and transport maintenance
• Electrical equipment
• Energy-efficiency services
• Fibre and communications infrastructure
• Public-sector software

Principal Risks

Planning delays, labour shortages and construction inflation could restrict delivery. Political negotiations could also affect the timing and allocation of funds.

Investment Perspective

Germany's fiscal shift created a potentially durable European investment cycle. The strongest opportunities were likely to involve scarce technical capability, recurring maintenance and diversified public-sector demand.

Regulatory Update

Regulatory developments during March focused on tariffs, artificial intelligence, digital assets and changing European fiscal policy.

Tariffs and Customs

Companies prepared for steel, aluminium, automotive and reciprocal tariffs. Customs classification, product origin and contractual responsibility for duties became increasingly important.

Artificial Intelligence

Businesses continued implementing AI-literacy requirements and controls governing prohibited uses under the EU Artificial Intelligence Act.

Digital Assets

The establishment of a US strategic Bitcoin reserve provided greater federal recognition of digital assets. Questions remained regarding future acquisitions, custody and disposal restrictions.

European Fiscal Policy

Germany's constitutional changes altered the region's borrowing and investment outlook. Businesses prepared for increased public procurement and stricter eligibility requirements.

Private Markets

Managers needed to update valuations where public comparables declined materially. Tariff scenarios also required incorporation into cash-flow and margin forecasts.

Compliance Priorities

• Map product origin and tariff exposure.
• Review contracts governing customs costs.
• Continue EU AI Act implementation.
• Assess digital-asset custody and reserve-policy implications.
• Update private valuations using current public comparables.
• Review eligibility for European infrastructure procurement.

Looking Ahead

Markets entered April awaiting the administration's planned reciprocal-tariff announcement. The scale and design of the measures were expected to determine the near-term outlook for equities, inflation and global growth.

US Tariff Policy

Investors would examine tariff rates, exemptions, implementation dates and the response of trading partners. A broad escalation could increase recession risk and weaken corporate margins.

Federal Reserve

The Federal Reserve would assess whether tariff-related inflation represented a temporary price-level effect or a more persistent threat. Weaker growth could support future cuts, while rising inflation expectations would require caution.

European Central Bank

The ECB remained positioned to continue easing if regional growth stayed weak. German fiscal expansion could eventually reduce the need for monetary support.

Bank of England

The Bank of England would monitor the combined effect of tariffs, wage growth and increased employment costs. Markets expected further gradual easing.

Corporate Earnings

First-quarter results would provide evidence regarding consumer demand, AI expenditure and tariff preparation. Forward guidance was likely to be more important than historical earnings.

Germany and Europe

Investors would assess the implementation timetable for defence and infrastructure expenditure. Companies with established capacity could benefit before new competitors entered the market.

China

China was expected to introduce additional support if trade pressure increased. Currency policy, export subsidies and domestic consumption measures would remain important.

Private Markets

Volatility could create attractive entry opportunities but also reduce financing and exit visibility. Investors would favour conservative structures and businesses capable of passing through costs.

CE Global Private Equity Perspective

March reinforced the importance of analysing policy risk alongside traditional financial fundamentals. Tariffs could alter costs, demand and competitive positioning with limited notice.

Germany's fiscal change created a significant long-term opportunity across infrastructure, defence, energy and industrial services. Execution capacity and procurement expertise will be critical differentiators.

CE Global Private Equity believes that resilient opportunities remain within domestic services, healthcare, infrastructure, cybersecurity and specialised industrial businesses. Greater caution is warranted where returns depend upon global supply chains or continued valuation expansion.

Liquidity, moderate leverage and flexible sourcing remain essential as markets prepare for further trade-policy announcements.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.