Global equities finished the first quarter of 2025 badly – the MSCI All-Country World Equity index slumped more than -4% in March, to close the quarter with a drop of -1,7% (in USD). American shares sank the most, as investors continued to be nervous about the uncertainty brought by Donald Trump’s trade policy. The broad index S&P500 fell by 4.6% from January to March, and the tech-heavy NASDAQ Composite – by more than 10%. By contrast, the Chinese and most European stock markets gained for the quarter. The month of March started with announcements that the United States imposed 25% tariff on most goods from Canada and Mexico, while also further increasing existing duties on Chinese imports. The retaliatory actions by these three key US trading partners prompted President Trump to pull back the new duties on Canadian and Mexican goods for a month (again!), which somewhat soothed markets. However, towards the end of the March newly announced 25% tariffs on all non-US made automobiles sparked inflation worries, and market volatility spiked again. Markets buckled further, when Donald Trump threatened to unveil a much broader set of tariffs to take effect on April 2. Although the US economy is much less reliant on trade, tariffs are still expected to be a drag on economic growth and to push goods inflation higher. Amidst such market turmoil, gold’s price continued to soar – it reached a new record high, as investors flocked to the precious metal in search for a safe haven from stockmarket uncertainty and looming inflation. During the first three months of 2025, gold went up 19%, chalking up its best quarterly performance in almost 40 years (since 1986)! So, driven by gold, Commodities were the best performing asset class in 2025 so far. Investors’ preference for risk-off assets was clearly pronounced – the worst performing sectors for the last month were Information Technology and Consumer Discretionary, while Energy and Utilities were among the top performers. A stock index tracking US large-cap growth stocks lagged behind its value counterpart by a big margin again, widening further its relative underperformance since the beginning of the year. Big American companies (mostly from Information Technology) were the top market leaders in 2024; however, for the first three months of this year, the growth index was down -10,0% versus a 1,2% gain for the value one. Although the US economic data came out somewhat mixed, the somber mood was noticeable – inflation expectations surged (from 3,3% to 4,3%), consumer confidence fell, manufacturing purchasing managers’ index (PMI) dropped slightly below 50 (indicating contraction), and GDP growth expectations were lowered. European share also dropped in March, as Trump’s tariff threats did not spare any markets. Against such a backdrop, emerging market equities outperformed developed markets for the month, with Chinese and Korean equities both performing strongly. Chinese shares now have risen more than 15% since January. Fixed income markets saw a noticeable divergence between America and Europe in March. While in the USA the market uncertainty led to sharp fall in sentiment and heightened probability of recession, European economic prospects improved considerably thanks to the enormous fiscal stimuli voted for infrastructure and re-armament. Correspondingly, the rising recession risks led to a return of 2.9% from US Treasuries (in USD), while expectations of much larger debt issuance to finance the new government spending programs weighed on European sovereign bond returns. The overall effect was that bonds were relatively stable and rangebound. The Bloomberg Global Aggregate bond index fell more than 3% (in EUR) during March, but less than 2,5% for the quarter. Thus, the advantages of a diversified portfolio were clearly demonstrated, as equity losses in the USA were offset by falling yields of US Treasuries (bond prices and yields move in opposite directions).
        American equities had a dismal month in March. Major headwind for the markets were the several new tariff announcements that President Trump made for certain countries (most notably Mexico and Canada) and for some goods (cars, steel and aluminum). Investors’ worries about an ensuing economic slowdown, rising inflation, and weakening consumer sentiment, sent the US stock indexes in negative territory, (and they registered their worst quarter since the dreadful 2022). The Information technology and Consumer discretionary sectors posted the steepest declines. The technology-heavy NASDAQ Composite index fell 7,7% in March, and by more than 10% for the quarter. Many of the tech-giants suffered: from January to March Nvidia’s stock tumbled by 19%, Alphabet’s by 18%, and Apple’s and Microsoft’s by 11%. Of the last year’s champions, the Magnificent Seven, Tesla was hit the worst – it has lost 36% of its value year to date.  However, most other sectors performed better, with Energy and Healthcare being the top gainers. The broad index S&P500 fell -5,75% in March alone, and was down -4,6% for the quarter. Investors feared that the trade tariffs, plus public sector optimizations (jobs cuts) planned by DOGE (the new Department of Government Efficiency), could put pressure on US consumers. The Conference Board consumer confidence index declined for the fourth consecutive month in March to 92,9 (down from 100,1 previously). The expectations portion of the index—which measures consumers’ short-term outlook for income, and for labor market conditions—dropped to 65.2, reaching its lowest level in 12 years (a reading below 80 could indicate a recession ahead). Given the souring mood, it’s unsurprising that the Fed decided to take no action at its March meeting on interest rates (keeping them on hold at levels of 4.25%-4.50%). The Fed did, however, revise its forecasts for 2025 GDP growth to 1,7% (slashing it from 2,1%), and for 2025 inflation to 2,7% (bumped from 2,5%). Inflation, as measured by Fed’s favorite metric, the core personal consumption expenditures (PCE), which exclude the volatile food and energy prices, rose at an annual rate of 2.8% in February—above economists’ consensus forecast and above the previous month’s figure.  On the other hand, corporate profits are still rising; the economy continues to create jobs are a healthy pace (the unemployment rate fell to 4.0% from 4.1%); and manufacturing PMI rose to 50.9 in January, the first time it was above 50 in two years. Stuck between a rock and a hard place, the Fed now will have to choose between the downside concerns for economic growth and the upside risks to inflation. The worsened perspectives of a Fed rate hike was one reason why the US dollar depreciated significantly against a basket of world currencies – against the Euro, the dollar lost over 4,2% in March, which additionally exacerbated the negative returns from US assets (stocks and bonds) for European investors. US Treasuries outperformed this quarter, with yields falling (and prices rising) in response to weaker economic activity data – investors aimed to find shelter in bonds, while stocks retreated. The divergence was most evident in corporate bond markets, where US dollar denominated bonds outperformed euro bonds across the board (both investment grade and high yield markets). The important US 10-year Treasury yield ended the quarter at 4.2%, 36 basis points lower relative to the start of the year.
        Despite the hefty pullback in March, European shares rallied solidly in Q1. The pan-European STOXX Europe 600 index ended the third month -4.2% lower, while for the quarter recorded a healthy 5.8% return (in EUR). After a strong rally in January, stocks were buoyed further in February, when the newly elected chancellor Friedrich Merz in Germany brought some optimism that his administration would pursue an agenda aimed at economic growth. However, the shares’ ascend was reversed in March, when markets pulled back amid worries over the USA’s fresh tariffs on imports, particularly those for automobiles and auto parts. The obviously confrontational approach of the new US administration had a mobilizing effect on European policymakers. The European Commission announced approvals for new spending programs without breaching the EU’s fiscal rules – one program for EUR800bn to boost the bloc’s defenses, and another one for EUR500bn for infrastructure, to run over the next 12 years. Business sentiment among companies notably improved, especially among German ones following the elections. The Eurozone’s purchasing managers’ index (PMI) rose to a seven-month high – with services already in growth territory, now manufacturing production also returned to expansion for the first time in two years. During the month there was also a change in leadership on the old continent – the German provider of business software, SAP, overtook the Danish pharmaceutical giant, Novo Nordisk, to become Europe’s most valuable company by stockmarket capitalization. SAP has benefited from the hype surrounding the artificial intelligence, while Novo Nordisk, to the contrary, has seen its share price halved since last June, as the excitement around its bestselling weight-loss drugs, Ozempic and Wegovy, subsided. The former contestant for the title of the biggest European company, the luxury-producer LVMH, also suffered, as demand from China has waned and Trump’s tariffs pose another danger to future sales. By contrast, European aerospace and defense companies have shot up recently, given the prospect of increased spending on the continent’s re-armament. The best performing sector for the quarter, however, was Financials. European banks in particular had a strong quarter with some robust earnings results – local banks are also relatively unharmed by the trade tariff war. Other top gaining sectors in Europe included Industrials, Energy, and Communication services. Underperforming sectors included Consumer discretionary and Information technology. Overall, European shares benefited mostly as global investors rotated away from expensively-valued US technology stocks. On the macroeconomic front, most of the data coming out of Europe was favorable. Annual inflation in the eurozone eased to 2.3% in February (from 2.5% in January), according to data from Eurostat. This gives the European Central Bank more room for maneuvering, compared to the Fed. In March ECB approved another 0.25% rate cut (its sixth in a row!). The move came in response to the anemic European economic growth and the rising geopolitical tensions, with markets currently pricing-in further 60 b.p. of cuts by the end of 2025. The huge size of European financial packages for infrastructure and defense spending shocked markets, and sovereign bonds’ yields rose (meaning that their prices fell). The German Bunds bore most of the blow of the subsequent sell-off across the Eurozone – the important 10-year Bund yield rose by more than 30 b.p. on the day after the announcement. On aggregate, German Bunds’ yields recorded their largest daily jump since reunification in 1990. The borrowing costs in other Eurozone member states also rose over the quarter.
         March was another month in which the indices of the Bulgarian Stock Exchange demonstrated their diversification advantage in a global portfolio. The large declines on the international пьинешя were not reflected on the BSE at all – the flagship SOFIX index remained almost unchanged for the month, and the broad BGBX40 even rose by 0.6%. In March, a new meeting was held with the companies participating in the BeamUp Lab programme, aimed at small and medium-sized enterprises interested in listing as a public company. The meeting was hosted by the BSE, with experts presenting the possibility of raising capital from the beam market, as well as the new crowdfunding platform, SpaceCrowd, designed to finance start-ups and initial business ideas. Thus, among the "blue chips" on the local bourse, the best performance for the month was delivered by the technology company Sirma Group Holding AD, which rose by more than 10%, and the biggest loser was the commercial bank Central Cooperative Bank AD, whose share price fell by 4.6%.
Source: Bloomberg, BSE