Tariffs and Inflation Drive Volatility

In Q1 2025, markets faced significant volatility as trade tensions, mixed economic data, and elevated equity valuations pressured investor sentiment. The Trump administration’s tariffs fueled stagflation concerns, while elevated FX volatility and anticipated uncertainty weighed on global trade. As a result, the Nasdaq-100 Index, US small-caps, US mid-caps, and the S&P 500 Index all posted notable declines. Meanwhile, US value/dividends held up better, and both international developed and emerging market equities posted positive returns. Looking ahead, market direction will likely hinge on how tariffs evolve, geopolitical developments, inflation and growth trends, and Federal Reserve actions.