March Market Review: European and US Equities Weaken Before "Liberation Day" Announcements

The Fed Stands Still, But Uncertainty Grows

At its mid-March meeting, the Federal Reserve left rates unchanged at 4.25%–4.50%, but markets focused on its downgraded economic forecasts. Chair Jerome Powell cited “unusually high” uncertainty, largely fueled by President Trump’s tariff policies, which continue to cloud inflation and growth expectations.

The Fed now expects slower growth (1.7%), higher unemployment (4.4%), and a pickup in inflation (2.7%) in 2025. While a recession doesn’t appear imminent, stagflation risks are building. Trump has urged the Fed to act more aggressively, but his trade, tax, and regulatory agenda complicates any clear path forward. For now, Powell is preaching patience, awaiting more visibility before adjusting policy. Some measure of clarity may come following the “Liberation Day” tariff announcements from Donald Trump, which are scheduled for April 2nd following the market close, even if the US President has now often reverted on policies quickly after implementing them.

US Markets React to a Deteriorating Outlook

Powell's cautious stance is understandable, as economic conditions across the Atlantic are far from encouraging. While the services sector offers a semblance of resilience, it merely conceals the struggles of the manufacturing sector, more vulnerable to Trump’s tariff shocks. Indeed, the US Manufacturing PMI fell from 52.7 to 50.2 in March, below expectations of 51.9, as if, anticipating tougher times ahead, resigned businesses were already preparing, at the onset of spring, for the inevitability of an economic winter. In this context, U.S. stock markets tumbled in March:

• The S&P 500 lost 5.75% over the month, erasing its early-year gains (now -4.59% YTD).
• The Nasdaq 100 declined 7.69% in March, dragging its YTD performance to -8.25%.

Investors appear to be shifting focus toward fixed income as equity momentum fades, especially with uncertainty surrounding upcoming trade tariffs and weakening consumer sentiment.

Europe: Mixed Signals and Modest Resilience

Across Europe, the picture is marginally more stable. The Eurozone composite PMI edged up to 50.4, suggesting flat activity overall. While services remain weak, manufacturing offered a hint of recovery. The manufacturing PMI rose to 48.7, and the industrial production sub-index entered expansion territory (50.7) for the first time in two years.

Still, markets remained cautious. The Eurostoxx 50 fell 3.94% in March, though it maintains a solid +7.20% gain YTD— substantially outperforming its US peers.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.