Recent weeks have selloff in global stock markets. What’s going on, and what should you do?

Before we start: financial markets change all the time, reacting to events as they unfold.  This short briefing note represents Moneycube’s views as at 0900 on Tuesday 25 Mar 25 and has not been updated since.

What’s happened so far?

In short, we have seen a sell-off in stock markets since the second half of February, followed by continued ups and downs over the last twelve days.

In particular, the US S&P 500 index of top American companies entered “correction” territory yesterday, meaning that it fell more than 10% from its recent peak (before recovering by 4.6% in the 12 days since its lowest point). The US Nasdaq, which is dominated by the big technology companies that have driven market growth for a year or more, has faced more severe movement, falling more than 15% over the last month (before rebounding partially).

European and Asian markets have also faced less dramatic changes, with the Eurostoxx 600 index of top European companies falling 4.9% from peak to trough, though it has since recovered about 2.8%.

How is that affecting your investments?

Funds with heavy US and global equity exposure have fallen in value since the start of the year.  Other funds have been less impacted.

The European stock market remains up around 8.1% since 1 January, despite the recent selloff.  Emerging market have also weathered events better.

Infrastructure funds are slightly positive year to date, and short term bond funds have continued to perform as expected with incremental gains.  And gold – traditionally a port in a storm – is up 15.2% in dollar terms.

Why are markets falling?

Several factors have combined to change the mood for investors in recent weeks. Here are the main ones:

1. Tariffs: threats and reality

The Trump administration is fond of frequently threatening, and sometimes imposing, tariffs on imports from other countries. For example, within days of coming to power in January, it used the threat of tariffs to secure Columbia’s acceptance of deported migrants.

Some tariff threats have become reality. Tariffs of 10% on Chinese imports, introduced last month, have now been doubled to 20%.

More recently it has introduced a 25% tariff on all steel and aluminium imports to the US from around the world. Other countries and regions, such as Canada and the EU, are responding by imposing tariffs on imports from the US.

The risk is that a tit-for-tat trade war reduces global trade and subdues economic activity across the globe.

The next round of tariffs is expected on 2 April, though markets have taken some heart from indications that there may be concessions.

2. Negative US economic data – positive European news

There are rising worries about the US economy. Consumer confidence has weakened, there are fears tariffs on imports will stoke inflation, and jobs reports have come in lower than expected.

In contrast, Europe is getting its act together, and that is prompting further market adjustments.

Bond market views have flipped. In a reverse of expectations at the start of the year, US bonds are now taking account of recession risk, while German bonds are pricing in economic growth as Europe belatedly invests in infrastructure and re-arms.

3. Markets have had a strong run for some time now

Benign economic conditions, falling inflation and excitement around artificial intelligence have driven strong gains since 2023, as we discussed recently here. Some of the recent price falls are due to investors looking for a reason to take profits.

Moneycube still believes the conditions are in place for growth in markets in 2025. The journey will be less smooth, but falling inflation, interest rate cuts and strong corporate earnings remain a positive combination for investors in risk assets.

What should you do?

It’s vital to put market movements over the last few weeks in context.

Remember gains to date – and the ground that’s been recovered

Almost all assets now selling off are those which have experienced a strong run since markets began to build momentum in 2023. The S&P 500, for example, is up 10.7% over the last twelve months – even after the recent pullback.

If you’ve been invested for more than a few months, you’re almost certainly sitting on gains. The last week provides a lesson in holding your nerve despite the volatility. If you stayed in, you’ve benefitted from a 2.6% rise in the US index.

Ups and downs are normal in financial markets

Volatility is part and parcel of investing your money – in fact, it’s the price you pay for getting a long-term return on your money in excess of bank interest rates. It’s not pleasant – but recognising that it is normal can help you tolerate it in your portfolio.

Nothing in the news and price action suggests that something is fundamentally broken (or breaking) in the global economy.

But volatility will likely remain elevated for some time

What’s new is the Trump factor. There’s no doubt that the US administration’s ‘flood the zone‘ tactics are contributing to higher volatility. It’s also likely to make businesses more risk averse and to delay investment decisions in some sectors, which will temper profit growth somewhat.

On the other hand, it is also precipitating investment decisions – including on a massive scale in Europe, which has found a route to raising huge sums to invest in infrastructure and defence. This will prompt a lot of economic activity and help drive investor returns.

Balanced portfolios will weather this storm

Gold, bonds, and many other assets are experiencing price increases as money seeks safe haven assets. If your portfolio is with Moneycube, you’ll be invested in a broad range of assets, spread among different industries, geographies, and asset classes.

If you’re still in doubt, have a read of one of our classic articles on what to do during market turbulence – or reflect on how quickly periods of volatility fade in the rear-view mirror here.