March 2025 Market Overview: Cautious Optimism Amid Global Trade Tensions

The March 2025 Mercer Chart Pack presents a landscape where global markets are adjusting to shifting trade dynamics, easing inflation, and evolving monetary policies. Investors face a mix of cautious optimism and persistent headwinds, particularly in equities and real assets.

Australian Economy at a Glance

Australia’s economic fundamentals remain relatively stable:

• Cash rate: 4.10%

• Inflation: 2.4% YoY

• Unemployment: 4.1%

• Wage growth: 3.2%

• Consumer sentiment: 95.9

• Business confidence: -1.5

These indicators reflect a resilient labour market, tempered business sentiment, and steady earnings growth amid global volatility​.

Market Performance: Mixed Returns

March performance was largely negative for risk assets due to heightened trade tensions. President Trump’s announcement of new and reinstated tariffs on China, Mexico, and Canada created uncertainty:

• Global equities (hedged): -5.0%

• Australian shares: -3.3%

• Australian REITs: -4.8%

• Emerging markets (unhedged): +0.4%

• Global infrastructure (hedged): +1.6%

• Australian bonds: +0.1%​

Over a 12-month horizon, many asset classes still delivered positive returns, including:

• International shares (unhedged): +13.7%

• Emerging markets: +12.2%

• Global infrastructure: +13.2%​

Global Equity and Sector Trends

• The Mag 7 tech stocks underperformed, while emerging markets outpaced developed markets over the past year.

• China’s market rebounded modestly, fueled by AI innovation and policy support.

• The ASX 200 Financials and Utilities sectors led domestic performance, up 16.29% and 16.14%, respectively. Conversely, Information Technology and Healthcare lagged​.

Macro Themes and Forward Indicators

• Volatility (VIX) continued its downward trend, suggesting calmer markets despite tariff shocks.

• Bond yields rose in Europe following Germany’s significant €500 billion fiscal stimulus, while Australian yields remained stable​

• Central banks in Europe and Australia held or reduced rates, indicating a cautious monetary stance as inflation moderates.

Investor Insights: The Case for Dollar-Cost Averaging

Mercer highlights the benefit of dollar-cost averaging through a case study of daily vs. annual lump-sum investing. Results show that consistent daily investment outperformed lump sums over long periods, reinforcing the value of disciplined investing in volatile markets​.

Conclusion

The March 2025 update reflects an environment of macroeconomic resilience in Australia, divergent equity performance, and shifting global policy dynamics. Investors may benefit from maintaining diversification, staying informed on policy moves, and adopting steady investment strategies like dollar-cost averaging.

Source: Mercer Investments (Australia) Limited, Mercer Chart Pack – March 2025.

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