INVESTMENT NEWS MARCH '25
Speed read
- Only seven weeks in The Oval Office and President Trump already completely dominates the world view.
- President Trump claims there is a master plan behind everything he does, but unrest and distrust are growing almost everywhere in the world.
- His policies are also causing great unrest among businesses and consumers in the US and are therefore also having a major impact on the US economy.
- American companies have begun to import goods and services en masse before the higher import tariffs take effect. Consumers in the US also appear to be becoming more cautious.
- According to the Atlanta FED, the US economy could shrink by 0.75% in the first quarter of 2025.
- Due to all the unrest and uncertainty, the chance of a US recession in 2025 is increasing unexpectedly and quickly.
- At the FED, the ECB and the BoE, interest rates are still significantly above the so-called “neutral rate” and there is still plenty of room to cut interest rates, if needed and if inflation problems are ignored.
- February was still an oasis of calm for investors, but since the beginning of March geopolitical tensions have increasingly had an impact on both prices and volatility in the financial markets.
- Top investor Warren Buffet's Berkshire Hathaway has built a record amount of cash to wait and see where the world is headed and to take advantage of bargains that are sure to come along.
- Goldman Sachs remains optimistic. They see corporate profits rising in both 2025 (+9%) and 2026 (+7.5%) and see the S&P 500 rising significantly again this year (+11%).
ECONOMY
Only seven weeks in The Oval Office and President Trump already completely dominates the world view. He manages to make the news every day, whether it concerns his plans for a “US takeover of the Gaza Strip”, the advances to Russia, the tough stance against Europe, Ukraine and President Zelensky, or the import tariffs that have now been imposed on Canada and China. President Trump claims that there is a master plan behind everything, but unrest and distrust are increasing almost everywhere in the world. Incidentally, that is something that President Trump also succeeded in doing well in his first term. However, his policy is also causing great unrest among the business community and consumers in the US and therefore also has a major impact on the US economy. In the run-up to the import tariffs that President Trump has already partially implemented and will undoubtedly expand further, American companies have started to import goods and services en masse before the import tariffs come into effect. Consumers have also become more cautious.
According to the Atlanta FED, the US economy could shrink by 0.75% (QoQ) in the first quarter of 2025. It would be an unprecedentedly bad start for a President whose motto is “Make America Great Again”. As a result of all the unrest and uncertainty, the chance of a recession in the US in 2025 is increasing unexpectedly quickly. According to research house BCA, the chance is now even 76%. Positive is that the interest rate at the FED, the ECB and the BoE is still considerably above the so-called “neutral rate” and there is therefore enough room to lower the interest rate further. Central banks must then close their eyes to the unchanged high inflation. Something that the ECB has now done, cutting rates by 25 basis points to 2.5% yesterday, Thursday 6 March.
Financial Markets
Compared to the high volatility on the financial markets in the first days of March, February was still an oasis of calm for investors. On equities, a high return could be achieved, especially in Hong Kong and Southern Europe. While bond investors, especially in the US, benefitted from a significant drop in the 10-year interest rate.
The increased geopolitical unrest as a result of President Trump’s “Make America Great Again” policy and the reaction to it by other countries, however, has increasingly had an impact on both the prices and the volatility of the financial markets since the beginning of March. Prices of both stocks and bonds alternate rapid increases with decreases as President Trump evicts his colleague President Zelensky from the Oval Office, issues import tariffs and/or reverses all measures. It is expected that this will remain the policy that we will see from Washington for the time being as long as President Trump believes that he has not yet achieved his goals. The best way to deal with this for the time being is perhaps like Berkshire Hathaway of top investor Warren Buffet. The fund has created a record amount of cash in the portfolio to wait and see where the world is going and to be able to profit from bargains that will undoubtedly come along in these geopolitically unsettled times. Goldman Sachs, on the other hand, remains undiminishedly optimistic about the prospects. They see corporate profits rising in both 2025 (+9%) and 2026 (+7.5%) and see the S&P 500 rising significantly again this year (+11%).
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