March 2025 Market Commentary & Outlook

US stocks declined in March as the administration levied significant tariffs on many of the countries’ largest trading partners. The lack of clarity around the extent and duration of the tariffs pushed stocks into correction territory as concerns about inflation, economic growth, and further trade conflict took center stage. At its March meeting, the Federal Reserve held interest rates steady, signaling a cautious stance amid the heightened uncertainty, while revising its outlook to reflect slower economic growth, higher inflation, and rising unemployment. Inflation came in lower than expected, the government avoided a shutdown, and unemployment remained stable during the month. Value stocks outperformed growth stocks over the month and quarter.

Although flat in March, international stocks continued to outperform their U.S. counterparts, capping off a strong first quarter that rewarded globally diversified investors. Emerging markets outperformed developed markets, but performance was collectively muted in March amid rising concerns of trade conflict. Escalating global tensions and increased government borrowing in Germany pushed yields higher, and international bonds declined in March. Central banks in Europe and Canada continued to ease benchmark interest rates.

Domestic bonds continued their strong first quarter and gained in March as investors turned to safe haven investments. Yields declined and the market expects the Fed to continue lowering rates later this year, despite recent policy announcements making their path less certain.

In early April, the administration announced sweeping new tariffs, raising concerns about inflation, slowing economic growth, and the possibility of a recession. Stocks pulled back in early April, posting the largest two-day decline in several years. Fixed income has been a source of stability through the pullback this year, with further volatility in the equity market expected as the new administration implements and negotiates new trade policies. The ensuing effect on inflation, corporate earnings, labor market health, and the Fed’s future direction will have a significant impact on markets in the coming months.