Market Compass March 2025

Highlights:

*Please note that this release precedes the Fed’s meeting on 19 March 2025 and does not reflect its impact.

• President Trump’s hawkish trade attitude may be testing our assumption that he will want to avoid large negative supply shocks. Political uncertainties in Germany are receding and a substantial fiscal boost to defence is in the offing.
• US-Russian peace talks on Ukraine and the erosion of US security guarantees for Europe are amplifying the global tectonic shifts from US tariff threats.
• US surveys are sending warning signals on growth and disinflation amid US policy turmoil. The risk of a wider trade war keeps a lid on sentiment.
• We maintain a prudent risk exposure, via Investment Grade (IG) Credit and a mimimal overweight in Equities. We prefer US duration medium term but see two-sided risks for US yields short term. Higher fiscal spending in Europe has led us to trim the long duration in Euro fixed income.

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