March 2025 opens with significant uncertainty for global markets as political tensions rise and economists brace for possible volatility driven by historical trends. Traditionally viewed as a relatively positive month, the S&P 500 has averaged +1.3% performance from 2000 to 2025. Yet, with the uncharted waters brought on by recent policy decisions and economic indicators, traders are advised to tread cautiously.
Historically, March has demonstrated mixed results, especially during post-election years since 1950, when the month often lost momentum as it progressed. This year, March could be quite different as the Triple Witching date of March 21 approaches, aligning with various significant market-driving events.
Among these events is the return of tariffs by former President Donald Trump. Trump has imposed sweeping tariffs of 25% on much of the imports from Canada and Mexico, significantly steepening tariffs on products from China to 20%. This escalation impacts around $1,500 billion worth of imports, marking the highest levels of U.S. tariffs since 1943 and triggering immediate turmoil across financial markets. The S&P 500 saw losses of 1.8% within hours of these announcements, holding brokers and traders on alert.
The responses from international partners came fast. Canada retaliated with tariffs of 25% on approximately $30 billion worth of American products, highlighting the potential for increased tensions to spiral out of control. Meanwhile, China responded by blacklisting ten U.S. companies and imposing tariffs on U.S. cotton, chicken, and soy imports, foreshadowing potential retaliatory tensions moving forward.
Such actions contribute to the climate of fear gripping investors, marked by the Fear & Greed Index, which has fallen to extreme fear levels at 24 points. This anxiety aligns with data from the Atlanta Fed, which recently revised its GDP growth projection for the first quarter of 2025 from +2.3% to -2.8% over just two weeks, indicating deepening concerns about economic performance.
With the volatility amplified by geopolitical uncertainties, survey results reveal stark sentiment among investors; 61% anticipate declines in stock markets over the next six months, significantly higher than the historical average of 31%. This pessimism reflects the first time since November 2023, when such negative expectations have crossed the 60% mark.
Looking toward monetary policy, the European Central Bank (ECB) under Christine Lagarde faces pivotal decisions on March 6, weighing the necessity of rate cuts against the possibility of reigniting inflationary pressures. Market speculation suggests multiple rate cuts might occur throughout 2024, though clarity from the ECB remains high on the agenda.
The focus intensifies with the upcoming Federal Reserve meeting scheduled for March 19, where Jerome Powell will be tasked with addressing the fate of potential rate cuts and providing transparency to investors. The broader central banking community, including the Bank of England, Bank of Japan, and Swiss National Bank, will also meet to discuss their policies during this pivotal week, adding another layer of complexity as markets strive to interpret the impacts on currencies and bonds globally.
March 2025 could reveal the need for investors to become increasingly discerning and cautious. While historical performance suggests encouraging trends, the present climate is punctuated by political volatility and unpredictable economic indicators. If one thing is clear, it’s the pressing need for astute risk management strategies as the uncertainty prevails over the financial horizon.