Fund watch

What happened in Q1?

Here are some key themes from the first quarter of 2025:

Trump’s trade policy lifts volatility: During the quarter, Trump’s on-again, off-again approach to tariffs created heightened levels of uncertainty.

Trump’s initial move was to slap a 25% tariff on imports from Canada and Mexico and increase tariffs on goods imported from China by an additional 10%. However, during the quarter, Trump delayed, then scaled back many of the tariffs – several were done on a sector basis.

Fed leaves rates unchanged; sees higher inflation: The US Federal Reserve (the Fed) left interest rates unchanged during the quarter, but made some tweaks in its Summary of Economic Projections (SEP) which largely reflected the current economic backdrop. While the Committee still sees two rate cuts this year, it revised up its inflation projections and now expects it to end the year at 2.7% versus the 2.5% it anticipated in December.

US exceptionalism stalls: After a prolonged period of outperformance, US equities spent most of the quarter underperforming in European and Asian markets. US equities faced headwinds from lofty valuations and policy uncertainty, while European markets were buoyed by German stimulus, including a pickup in defence spending.

Meanwhile, China saw some advancements in the artificial intelligence (AI) space, including the release of DeepSeek’s R1 model – an AI chatbot that was developed at a fraction of the cost of its US competitors.

This article has been prepared by ANZ New Zealand Investments Limited (‘ANZ Investments’) for information purposes only and it should not be treated as financial advice.

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