Every so often, we get a quarter where the events that follow make the period in question feel like a distant memory… and this was certainly one of them! That said, it was still an action-packed quarter.Let's review the first quarter of 2025.
Jan
DeepSeek debuts, Trump returns
Chinese A.I. entered the global spotlight with DeepSeek’s debut, sparking renewed interest in Chinese tech and triggering outflows from Indian equities. US investors also began reassessing the threat to American A.I. dominance, prompting a broader rotation into undervalued markets like China, Europe, and value stocks.
The US held rates steady, while the ECB cut again, and India introduced stimulus to counter a weakening economy ahead of expected US tariffs. Chinese data showed modest improvement, with firms front-loading production in anticipation.
Donald Trump was inaugurated as the 47th US President, issuing executive orders that were largely welcomed by markets.
Feb
US-China trade tensions rise, Europe breaks fiscal ground
February began with strong US earnings and reasonable results from Australia, though local markets ended with high volatility. Rate cuts from the Bank of England, RBA, and RBI supported sentiment, with the RBA’s decision notably timed ahead of a possible federal election.
Momentum shifted as Trump announced major tariffs on Canada, Mexico, and China—prompting immediate retaliation. Additional tariffs on aluminium and steel also impacted Australia. These moves, alongside US government spending investigations, weighed on confidence and led to weaker economic indicators.
Geopolitically, peace talks began in Ukraine and the Middle East. Germany elected a new centre-right leader and, along with the EU, broke fiscal norms with major defence and infrastructure spending. This shift, following the collapse of US–Ukraine talks and halted US aid, boosted European equities, the Euro, and bond yields.
Mar
Australia delivers pre-election budget
In March, the US implemented February’s announced tariffs, along with new agricultural subsidies, prompting swift retaliation from China. Markets reacted negatively, with rising inflation fears dampening hopes of Fed rate cuts. Chinese economic data softened as early-year production momentum faded, while Australian employment figures showed unexpected weakness.
The US Fed held rates steady but revised forecasts—raising inflation expectations and lowering growth projections for 2025. A government shutdown was avoided through a continuing resolution.
Geopolitical tensions rose as the US launched strikes on Yemen’s Houthis to protect shipping lanes, with pointed warnings toward Iran. Meanwhile, Russia and Ukraine reached partial ceasefire agreements, and limited US aid resumed.
In Australia, the federal budget revealed a cash deficit and surprise tax cuts ahead of the election, though longer-term projections showed rising debt and deficits. The quarter ended with markets bracing for April 2, “Liberation Day,” when major US reciprocal tariffs were expected.
Looking ahead, investor sentiment and economic outcomes will largely hinge on tariff developments, US Treasury actions (including debt refinancing and deficit reduction), and increased US oil production.
Key factors to watch include the trajectory of the US economy, the impact of deglobalisation on global growth, tariff-driven volatility affecting confidence and inflation, and escalating geopolitical tensions. These dynamics present both risks and opportunities, particularly in a potentially weaker economic environment.
Given the current uncertainty around trade policy, we’re taking a more cautious stance—maintaining agility, a well-diversified approach, and a focus on high-quality opportunities with strong valuation support.