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News Flash - March 2025 - Global markets struck by recession fears

After an exceptional year 2024, the US markets have been experiencing turbulence since the beginning of 2025. The leading index, the S&P 500, is down nearly 10%1, while the tech-heavy Nasdaq has dropped by 14.10%.

The session on March 10 was particularly striking, with the S&P 500 falling by 2.58% and the Nasdaq dropping by 3.70%. In comparison, European markets have held up better, with their benchmark index losing only 1.30%, while China has posted a loss of 2%.

Behind these market fluctuations, fears of a recession in the US are intensifying, fueled by the radical economic policy shifts undertaken by the Trump administration.

1 Performances in EUR

Uncertainties related to Trump’s economic choices

The new administration is muddying economic forecasts with its fluctuating trade policy. Between the tariffs imposed on China and those pending on Mexico and Canada, markets, initially concerned about inflationary risks, are now fearing a slowdown in growth.

At the same time, Donald Trump and his team have shown their intent to reduce public spending, particularly in employment, to improve the state’s finances. While these measures are not immediately conducive to growth, they aim to reduce the budget deficit to finance future tax cuts and ease financing conditions. In the long term, these adjustments could benefit productivity and economic expansion.

In early February, Treasury Secretary Scott Bessent announced his goal of lowering the yield on 10-year government bonds. This goal seems to be on track: despite unchanged monetary policy from the Fed, this rate has decreased from 4.80% in January to 4.20% today.

At the same time, 30-year mortgage rates have dropped by 0.70 percentage points. Another of the Trump administration’s goals also seems to be materialising: a decrease in energy costs. Indeed, the price of Brent crude has dropped from $80 to $70 per barrel in just a month and a half.

Exaggerated recession fears?

Trump himself admits that the US economy is going through a transitional phase, but the extent of the recession fears seems, for now, to be exaggerated. True, American consumer sentiment has been weakened by the risks of inflation returning due to tariff hikes. However, it is important to note that confidence indicators have been unreliable in recent years. Since the pandemic, consumers have shown persistent nervousness, yet their consumption habits have remained solid.

The latest employment reports bear this out: in February, 151,000 jobs were created in the US, keeping the unemployment rate at 4.1%, still a low level. Additionally, manufacturing jobs, particularly sensitive to economic cycles, rose by 10,000 jobs, contrary to expectations.

Thus, the decline in consumer confidence should be put into perspective, as it does not immediately affect consumption habits and, consequently, growth.

Markets between caution and opportunities

Analysts remain confident: earnings expectations for the S&P 500 have not been revised downwards, and the recent market decline is more due to a contraction in multiples – in other words, a deterioration in investor sentiment rather than a weakening of economic fundamentals.

Moreover, the uncertain environment creates opportunities outside of the US. The gradual withdrawal of the US from the geopolitical stage has paved the way for increased initiative in Europe. Germany plans to invest €500 billion in its infrastructure over the next decade, while European states are increasing their military spending. These initiatives could not only boost economic activity in the short term but also strengthen productivity in the long term.

Finally, China has reaffirmed its 5% growth target for 2025 and is shifting towards increased support for consumption by easing its fiscal and monetary policy.

In short, while markets remain nervous, the global economic outlook still offers reasons for optimism. The current market turbulence mainly reflects a period of uncertainty, driven by economic adjustments and the unpredictability of the Trump administration. However, economic fundamentals remain strong, as evidenced by the positive employment figures in the US and the stimulus outlook in Europe and China.

Furthermore, it should be noted that US markets were very highly valued before this recent decline, which was reducing expected returns in the region. Today, with robust earnings growth anticipated, the US also gains potential thanks to the lower valuation level resulting from the recent drop. The theme of artificial intelligence and the productivity gains it promises remains relevant, despite the ongoing correction phase.

While investors remain cautious about the challenges ahead, the market decline seems more related to a deterioration in sentiment than a real deterioration in the economy. In this context, volatility may persist, but investment opportunities are still plentiful, provided a long-term view is adopted and the new economic dynamics are embraced.

Aykut Efe
Economist & Strategist
Spuerkeess Asset Management

Damien Spohn
Deputy Head of Investments 
Spuerkeess Asset Management