March was another down month for stock markets, delivering the worst first quarter for Australian shares since the initial Covid hit of 2020. The US stock market led the selloff, with the S&P 500 down 5.6% during March, while the ASX 200 fared little better, down 3.4%. Emerging markets eked out a positive return of 0.6%, led by the Hong Kong market which rallied 2.5% over the month driven by historic low valuations and increasing Chinese stimulus measures.
The market downturn has intensified in early April, exacerbated by US President Trump’s enactment of additional trade tariffs. The uncertainty surrounding future trade policies poses significant challenges for capital allocators. Without clear guidance on the scope, duration, or ultimate goals of these tariffs, decision-making becomes increasingly difficult for investors, corporate leaders, and consumers alike. Questions abound: Should we adopt a more cautious stance? Should sacrifices be made now to weather a prolonged slowdown? Or will new agreements restore confidence and enable long-term planning?
While the answers remain uncertain, the economic outlook appears increasingly negative following a roughly 10% market decline. Beyond trade tensions, signs of slowing economic activity, heightened anxiety levels, and persistently high valuations — particularly among US large-cap companies —are concerning. Additionally, tariffs are expected to exacerbate inflationary pressures, further straining household budgets.
Beneath the market turbulence lies a significant rotation within global equities. In March, the MSCI World Growth factor was the worst performer, declining by -7.5%, while Minimum Volatility emerged as the best performer with a modest gain of +0.7%. This sharp factor rotation is rapidly reshaping market dynamics, as evidenced by the S&P 500’s steep decline of over 9% in just the first week of April. Such a dramatic weekly selloff has only occurred on three occasions over the past 25 years: the dot-com crash, the Global Financial Crisis, and the COVID-19 pandemic. Historical data indicates that moves of this magnitude happen just 0.1% of the time—a rare and telling signal of the current market stress.
Figure 1. World equity factor performance, March 2025 vs 2024 Calendar year
How to ride a bear
We continue to maintain a patient and defensive stance in light of elevated market risks, even as markets approach bear territory. Our Dynamic models are designed to prioritise downside protection by incorporating defensive positions, complemented by active management strategies across all models. This balanced approach ensures we are well-prepared to navigate ongoing market volatility.
Recognising early warning signs of heightened risk allowed us to position defensively ahead of the current turbulence. This proactive strategy has enabled us to remain composed as fear escalates and less-prepared investors exit the market in haste. While we acknowledge that timing the market bottom with precision is unlikely, our preparedness positions us to capitalise on more attractive growth asset pricing when the opportunity arises.
Our approach reflects a commitment to preserving capital during volatile periods while remaining poised to seize future opportunities. By combining defensive positioning with active management, we aim to strike a balance between risk mitigation and readiness for long-term growth.
For readers seeking strategies to navigate turbulent markets, we recommend revisiting our March 2023 article “Riding the bear”, outlining five proven techniques for managing downturns effectively. As global uncertainties persist, staying informed and adopting a disciplined approach remains paramount.
