The Return of Market Volatility: What March 2025 Taught Us and What Expats Must Do Next

Markets do not provide polite warnings. They correct, often without notice. And in March 2025, we saw a clear and decisive correction and market volatility across global asset classes.

After a strong start to the year, fuelled by optimism around falling inflation and anticipated interest rate cuts, confidence faded rapidly. Volatility reappeared. Equities reversed their gains. Bond yields jumped. For globally minded investors, especially expats in the Middle East, this was a significant moment to reassess the strength and structure of their investment plans.

March was not just a market event. It was a test. One that revealed how portfolios behave when optimism turns into uncertainty. And for those with capital invested internationally, it was a reminder that diversification, structure, and discipline remain essential.

What Happened in March? A Perfect Storm of Policy, Inflation, Market Volatility and Uncertainty

The calm optimism that defined the start of 2025 quickly faded in March, as a combination of geopolitical policy shocks and economic data surprises sent financial markets into retreat. What followed was a significant re-evaluation of risk across equities, bonds, and currencies, resulting in one of the most volatile periods since the end of 2022.

This was not a panic event. It was a repricing of expectations, but one that came with consequences for globally diversified investors.

A Sudden Tariff Shock: Trump’s Trade War 2.0

The most visible catalyst came on 4 March, when President Trump announced a dramatic tariff package targeting Chinese imports. The measures included a 145 percent tariff on certain categories of goods, affecting a wide range of Chinese-manufactured products, including semiconductors, consumer electronics, and automotive parts.

Markets had grown used to inflammatory rhetoric, but this announcement was different. It was a formal, policy-level decision that revived memories of the 2018–2019 trade tensions. Investors responded swiftly, recognising the scale and potential economic consequences of reigniting a trade war between the world’s two largest economies.

In just 48 hours, equity markets saw aggressive selling:

• The Dow Jones Industrial Average fell by more than 4,000 points.

• The FTSE 100 dropped by over four percent, reflecting the index’s sensitivity to global trade flows and commodity-linked stocks.

• The MSCI World Index, a benchmark for global equities, registered its sharpest weekly decline in over a year.

Investors feared a broader deterioration in international trade relations, tighter supply chains, and corporate earnings pressure, particularly in sectors with global exposure.

Inflation Data Reignites Rate Concerns

While the tariffs captured headlines, markets were already uneasy following a string of inflation readings that came in hotter than expected.

In the United States, the February inflation print released in early March showed core Consumer Price Index (CPI) inflation at 3.4 percent year-on-year, still well above the Federal Reserve’s two percent target. Similarly, wage growth data showed continued pressure in the labour market, particularly in services and healthcare.

Europe told a similar story. The Eurozone’s core inflation held steady at 2.9 percent, with services inflation proving especially sticky. For central banks that had signalled a desire to ease monetary policy, this forced a reassessment.

By mid-March, investor expectations for rate cuts had shifted noticeably. Markets began pricing in the possibility that the first cut from the Federal Reserve might not arrive until September or even later. Rate cut expectations in the UK and Eurozone were also pushed back, with several economists revising forecasts for only one or two cuts in 2025, compared to three or four previously expected.

This shift in outlook had a direct impact on fixed income markets. Bond yields rose sharply as investors adjusted to a world where rates might stay higher for longer. The US 10-year Treasury yield moved from 4.25 percent to 4.63 percent in just a few sessions, a large move in such a heavily traded market. Higher yields reduce the present value of future cash flows, which in turn weighs on equity valuations, particularly in the technology sector.

Equity Markets Reprice Growth and Risk

Once the tariff announcement and inflation shock combined, equities responded decisively. The selling was broad-based, but not indiscriminate.

Technology stocks, particularly in the United States, were hit hard. These companies tend to be more sensitive to interest rate movements, given their long-duration earnings profile. Firms with exposure to global supply chains, such as those in the semiconductor and automotive industries, also suffered due to concerns about rising costs and slowing demand.

Meanwhile, small-cap equities and emerging markets displayed more resilience. Investors rotated into areas of the market perceived as less exposed to global policy risk and more likely to benefit from stabilising commodity prices.

Sector rotation also became more visible. Defensive sectors such as healthcare, consumer staples, and utilities began to outperform, while discretionary and industrial names lagged.

By the final week of March, volatility had stabilised, but the narrative had changed. Investors were no longer debating how soon interest rates might fall. They were instead assessing how long they might stay elevated, and what that would mean for earnings growth, capital allocation, and asset prices across the board.

A Market in Reset Mode

This confluence of events, a politically driven tariff shock, stronger-than-expected inflation, and a rapid repricing of rate expectations, created a rare alignment of risks across asset classes. Volatility spiked, credit spreads widened, and risk appetite weakened.

Importantly, this was not a systemic crisis. It was a moment of reset. But it exposed complacency in several areas of the market and reminded investors that optimism alone is not a strategy.

For expats who are managing international portfolios across multiple currencies, jurisdictions, and risk exposures, this type of market event is especially meaningful. It reinforces the importance of having a plan that is designed not just to grow during good times, but to hold its shape when pressure builds.

From My Desk to Yours

I have advised clients through recent financial crisis, through COVID, and through the unpredictable cycles in between. Every time markets become unsettled, the same truth emerges. The investors who succeed are not those who try to time the market.

They are the ones who build resilient portfolios, understand their long-term goals, and avoid emotional decision-making when the headlines become dramatic. This past month has been no different.

What Comes Next: A Critical Few Months Ahead

As we move into the second quarter of the year, the key question facing markets is whether March was a short-term reset or the beginning of a more persistent period of instability. While no one can predict market movements with certainty, several forward-looking indicators deserve close attention.

Corporate Earnings Will Reveal the Truth About Growth

First and foremost, corporate earnings will play a decisive role. Throughout April and May, US and European companies will report their results for the first quarter of the year. These numbers will show whether higher interest costs, geopolitical headwinds, and shifting consumer behaviour are beginning to impact profitability.

Investors will be especially focused on margins, forward guidance, and capital expenditure plans. If companies begin cutting investment or signalling hiring freezes, it could be a sign that the economy is cooling faster than expected.

Sectors to watch include banking, which reflects the health of credit and liquidity conditions, and technology, where valuations remain stretched and execution needs to be flawless to justify current prices.

Inflation Remains the Market’s Single Biggest Risk Factor

The second major variable is inflation. If upcoming data in the US, UK, and Eurozone shows that prices remain sticky, particularly in services and wages, then central banks will have no choice but to remain cautious. Any upside surprise in inflation could derail investor hopes for policy easing and send yields higher once again.

Conversely, if inflation moderates meaningfully, it could validate a more dovish tone from policymakers and help bring back a level of stability in rates, providing support to both equity and bond markets.

Central Bank Communication Will Set the Tone

The tone of communication from central banks over the coming weeks will be critically important. Markets are now acutely sensitive to language. A single sentence in a policy statement can shift rate expectations by months.

The Federal Reserve will likely continue to walk a fine line between acknowledging softer data and maintaining inflation credibility. The European Central Bank, which is dealing with more fragmented economic performance across member states, may begin hinting at selective easing even before the Fed moves.

Geopolitical Risks Are Not Going Away

Finally, geopolitics will remain in focus. China’s potential response to Trump’s tariffs is still unknown. Any retaliatory measures could extend the economic fallout. Elsewhere, developments in the Middle East, ongoing tensions in Ukraine, and upcoming elections in the United States all have the capacity to influence market sentiment and capital flows.

In short, the coming quarter will be shaped not by any single event, but by how multiple variables interact. Markets are no longer moving on good news alone. They are now responding to the full complexity of inflation, interest rates, policy risk, and investor psychology.

A Clear Takeaway

What we saw in March was not a crash. It was a moment of clarity. Markets reminded investors that rates are still elevated, inflation is not yet defeated, and politics can still rattle confidence. More importantly, March exposed the difference between portfolios that are built to withstand volatility and those that rely on momentum alone.

If your portfolio left you feeling anxious or confused during the recent sell-off, that is a sign it may not be built correctly. A well-structured plan should give you clarity, not stress, in moments like this. You should know what you own, why you own it, and how it aligns with your goals.

Final Thought

You cannot control markets, central banks, or politics. What you can control is how your wealth is structured, where your assets are held, and how well your plan has been designed to meet your long-term goals. Volatility will always return. The question is whether your portfolio is prepared to endure it.

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