The first quarter of 2025 proved a volatile period for equity and bond markets. Elevated uncertainty stemming from the unpredictable nature of US trade policy dampened growth expectations in the US, while in Europe, the fiscal response had been much more forceful than many were anticipating.
Developed equity markets struggled over the quarter as tariff-related headlines buffeted US equity markets, with the MSCI World (local currency) index down -2.7%. The US administration announced a raft of new tariffs on steel, aluminium and autos, while shifting expectations around the severity of pending tariff announcements due on 2nd April drove swings in market sentiment.
Value stocks outperformed their growth counterparts, while smaller companies lagged as rising trade uncertainty drove concerns around both weaker growth and stronger inflation. Emerging market equities outperformed developed markets, posting a 2.7% return (MSCI Emerging Markets, local currency) as Chinese and Korean equities both performed strongly. Asian equity markets saw high levels of dispersion. Chinese stocks outperformed thanks to a combination of US tariffs so far proving less punitive than feared, improving sentiment towards Chinese technology stocks following DeepSeek’s AI breakthrough, and hints of a more supportive policy stance from Beijing. In contrast, Indian stocks struggled while a stronger yen driven by narrowing interest rate differential created headwinds for Japanese equities.
Fixed income markets outperformed developed equities with rising recession risks leading to a return of 1.1% (JPM GBI, USD Hedged). US Treasuries were notable outperformers over the quarter, returning 2.9%. Conversely in Europe, expectations of much larger issuance to finance new government spending programmes weighed on sovereign bond returns and saw 10-year German Bund yields rise by more than 30bps (basis points) on the day after the €500bn infrastructure spending plan was announced. Japanese government bonds were the notable underperformer as recent data emphasises building inflationary pressures. Given elevated uncertainty, the Federal Reserve (Fed) decided to take no action on interest rates over the quarter but Fed Chair Powell did leave the door open to future rate cuts at the March meeting, suggesting the Fed was more concerned about the downside risks to growth than the upside risks to inflation. The European Central Bank (ECB) was more positive about the prospect of further fiscal stimulus ahead, with ECB President Lagarde explicitly praising the change in approach at the March meeting. The ECB cut interest rates twice during the quarter, with a further 60bps of cuts priced by markets by the end of 2025.
JPMorgan Asset Management believes that the outlook for U.S. tariff policy remains highly uncertain. We will continue to monitor any potential retaliations from trading partners, the outcomes of individual country negotiations, and potential concessions/exemptions, as well as the impact these tariffs may have on U.S. growth and inflation.
JPMorgan Asset Management continues to reduce equity risk as tariff news develops, maintaining a neutral to modest overweight stance across portfolios. We seek to diversify our investments by expanding our exposure to regions and sectors outside of the U.S., particularly in Europe and Japan.
JPMorgan Asset Management also sees opportunities in credit as all-in yields remain attractive, though the magnitude of the positiveness has moderated.
The Retirement Portfolio is a single investment solution which employs a ‘glidepath’ strategy.
The investment team considers current market conditions in managing the portfolio. Additionally for the Retirement Portfolio, your portfolio allocation will shift based on your own timeline to retirement.
When you are further out from retirement, the portfolio allocation is geared towards higher risk assets such as equities to help you accumulate and grow your wealth over years to retirement. The longer time horizon to retirement would also allow for your portfolio to ride out ups and downs of markets.
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You can consider the Retirement Portfolio if:
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