March Update

March 2025 was a notably tough month for U.S. equities, setting the tone for a difficult quarter driven by a sharp market correction triggered by rising trade tensions from Trump’s tariff policies, resulting in the weakest quarter for U.S. stocks in over 23 years—the worst since the dot-com crash of early 2002. The S&P 500 declined 10% from its February 19 peak by March 17, marking the fifth-fastest correction in history at just 20 days. The Nasdaq-100 also faced significant pressure, entering correction territory with a 13.6% drop from its mid-December high by early March, and experiencing its largest single-day decline since September 2022 on March 10, down 4%. Weak economic indicators, global trade war concerns, and policy uncertainty amplified the decline, positioning March 2025 as a historically challenging period for investors, with the first quarter’s losses underscoring the market’s worst quarterly performance in over two decades. This downturn preceded the Liberation Day Press Conference on April 2, where the Trump Administration further escalated tensions—an event to be explored in the April Monthly Update and the Quarterly Update, given its critical timing.

Trump Tariffs 2.0

In March 2025, the implementation of Trump’s tariffs on Canada, Mexico, and China, effective from March 4, sparked widespread market turmoil as fears of a global trade war intensified. Retaliatory measures from China and threats of reciprocal duties from Canada and the EU escalated tensions, while Trump’s inconsistent policy moves—such as delaying auto tariffs, briefly proposing to double steel and aluminum tariffs, and later walking back some increases—created significant uncertainty. Weak economic indicators, including declining manufacturing data and consumer sentiment, compounded the unease, leading to a rapid market correction. By March 17, the S&P 500 had dropped 10% from its February 19 high, marking the fifth-fastest correction in history, driven by the fallout from "Trump Tariffs 2.0" and broader concerns over economic growth.

Fastest Market Corrections – Since 1950

The recent market correction, spanning from February 19, 2025, to March 11, 2025, marks a significant event in financial history, ranking as the fifth fastest 10% decline from a 52-week high for the S&P 500. This rapid 20-day drop ties with two other notable corrections—October 5 to October 25, 1979, and October 7 to October 27, 1997—both of which also took just 20 days to decline 10% from their peaks. The speed of this correction places it among the most abrupt in the index’s history, with only four prior instances occurring faster: the 2020 COVID crash (8 days), the 2018 Trump Tariffs 1.0 (13 days), the 1955 Eisenhower heart attack (18 days), and the 1950 Korean War shock (17 days).

This correction, attributed to "Trump Tariffs 2.0," reflects market concerns over escalating trade tensions, likely driven by new tariff policies under the Trump administration. Historically, fast corrections like this have been triggered by major macroeconomic or geopolitical shocks, as seen with the causes of the top five. Despite the severity of the decline, forward returns following such rapid corrections are generally positive. The data shows an average S&P 500 return of 2.9% after one month, 8.2% after three months, 15.0% after six months, and 19.9% after twelve months, with a win ratio of 83% to 100% across these timeframes. For investors, this suggests the markets have historically rebounded strongly after such swift declines. However, the unique circumstances of 2025, namely, the specifics of the tariff policies and global economic reactions—will be critical to monitor in the coming months.

Source: FundStrat, Bloomberg

Worst Quarter in US Equities in 23 Years

The first quarter of 2025 marked a grim milestone for U.S. equities, as the MSCI US Index recorded its worst quarterly performance relative to the rest of the world in 23 years, a downturn not seen since the accounting scandals of 2002, according to Bloomberg Opinion. As depicted in the chart, this period—labeled "Trump 2.0"—saw U.S. stocks underperform global markets by over 10%, a sharp decline echoing previous significant lags during the Japan Bubble of the late 1980s and the WorldCom and Tyco scandals of the early 2000s. The catalyst for this steep drop was the escalating trade tensions driven by Trump’s aggressive tariff policies, which rattled investors and eroded confidence in U.S. economic stability. This underperformance highlights the vulnerability of American markets to policy-driven disruptions, positioning the first quarter of 2025 as a historically challenging period for U.S. investors amidst a backdrop of global economic uncertainty.