Please see below, an article from Brooks Macdonald providing a brief analysis of the key factors currently affecting global investment markets. Received this morning – 11/03/2025:
What has happened
Continued uncertainty in markets around US president Trump’s global trade tariff plans came home to roost on Monday. With fears that tariffs might curb economic growth yet stoke inflation pressures, equity share prices dropped, and government bond prices rose. However, rather shaping up as blanket risk-off move, there was some rotation into the more defensive parts of the market in evidence: global equity defensive sectors including Healthcare outperformed the wider market on the day, beating Technology stocks. In fixed-income markets, credit spreads saw a noticeable widening, with US high-yield spreads (versus US government bonds) posting their widest levels in six months.
US megacap technology stocks lead the day’s losses
The US megacap technology ‘Magnificent Seven’ group (made up of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla) were among the biggest falls on Monday. Falling -5.41%, the group fell into bear market territory, defined as a fall of -20% or more versus the previous peak in December, now down -21.75% in dollar price return terms. More broadly, however, markets have seen some rotation into defensive sectors in recent weeks – indeed, so far this year in sterling total return terms across MSCI World (developed markets) sectors, while Technology is down -13.15%, Healthcare is up +4.02%.
A setback for German fiscal plans
Germany’s latest plans for releasing the country’s fiscal ‘debt brake’ in order to allow for infrastructure and defence spending got a setback on Monday. The Green Party yesterday said they would not support amending the constitutional debt brake – that matters as given the share of the various parties’ seats in the current German parliament, the Green’s votes are needed to secure the two-thirds vote majority required to overturn the rule. Rather than a hard ‘no’ however, this appears more a negotiating tactic, as the Green Party left the door open to further talks and added that they would introduce their own legislation, expected to ensure that any spending also includes a share for climate change projects.
What does Brooks Macdonald think
Megacap technology stocks have played a big part of the broader US and global equity market rally in recent years, but as a result it has led to some uncomfortable concentration risks with equity indices dominated by just a few tech giants. We have been mindful of this for some time – at the beginning of last year our asset allocation committee added to US small and mid-cap stocks rather than increase our allocation to larger capitalised stocks and megacap tech names in particular. While Technology is one of our two key global equity themes (alongside Healthcare), given our preference for diversification we are underweight the ‘Magnificent Seven’ group of stocks relative to our PIMFA benchmarks across all five of our client-risk band models.
Bloomberg as at 11/03/2025. TR denotes Net Total Return.
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Andrew Lloyd DipPFS
11th March 2025