In March, President Trump’s policies were again responsible for tensions and turmoil in financial markets. On the one hand, there was the failed meeting between the US and Ukraine in Washington regarding peace talks with Russia. On the other hand, the announced import tariffs and “Liberation Day” came closer and closer. American stocks suffered the most, but the dollar also lost more than four percent against the euro. In Europe, Germany’s plans to invest in defense and infrastructure became more concrete. Amid all the political violence, the ECB cut interest rates by 0.25% (to 2.5%) and the Fed left interest rates unchanged at 4.25%-4.50%.
Shares
The mood was downright bad in equity markets in March, there were few exceptions. The MSCI All Countries World index (measured in euros) went down solidly with a negative return of -7.5%. Although emerging markets could not escape the malaise (-3.1%), they still did considerably better than developed markets (-8.0%). Among the latter, North America was again the bitten dog, listing 9.2% lower than the previous month. Pacific excluding Japan (-5.5%), Europe (-4.0%) and Japan (-3.6%) experienced milder losses in March. Among emerging markets, the picture was slightly kinder; Latin America even managed a positive return (+0.9%). The EMEA (-1.1%) and China (-1.8%) regions contained losses. Asia (-3.8%), however, had to give up more. Style value stocks (-4.7%) yielded significantly less than style growth stocks (-10.3%).
Bonds
On balance, 10-year interest rates in America remained unchanged at the end of the month (at 4.21%). In Europe, government bond yields rose significantly. For example, 10-year government bond yields in the Netherlands went up by 0.36% and in Germany by 0.33% (to 2.96% and 2.74% respectively). Further increased turmoil and uncertainty reduced investors’ risk appetite. Bonds with a higher risk profile therefore performed less than safer bonds. The risk premium of less risky corporate bonds increased by 0.07% to 0.95%. More risky corporate bonds even experienced a significant increase of 0.56% (to 3.55%). In between, the emerging market government bond category was up 0.21% to 3.49%.