ALTERNATIVE MARKETS UPDATE – END MARCH 2025

Since President Donald Trump's inauguration, his administration has threatened or implemented a series of tariffs aimed at reshaping US trade relationships and bolstering domestic industries. These measures have targeted a range of imports, including steel, aluminium, and various goods from Canada, Mexico, and China, with the intention of reducing trade deficits and addressing national security concerns. In the past two weeks, the administration has intensified its trade policies by imposing a 25% tariff on imported automobiles and certain automotive parts. Announced on 26th March 2025, these tariffs are set to take effect on 2nd April 2025 and are expected to significantly impact both foreign automakers and domestic companies that rely on global supply chains. Consumers may face increased vehicle prices, with estimates suggesting potential increases of up to $12,500 per imported vehicle. ​Concurrently, the Federal Reserve has maintained the federal funds rate at a target range of 4.25% to 4.50%. The decision reflects the central bank's cautious approach amid rising inflation and economic uncertainties exacerbated by ongoing trade tensions. Policymakers are holding onto their pace of two rate cuts as projected at the beginning of 2025. The Fed also highlighted that tariffs make their decisions more difficult, as it likely alters the inflation rate. ​

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RESEARCH PERSPECTIVE VOL. 248 March 2025 Alternative Markets Update ​​Since President Donald Trump's inauguration, his administration has threatened or implemented a series of tariffs aimed at reshaping US trade relationships and bolstering domestic industries. These measures have targeted a range of imports, including steel, aluminium, and various goods from Canada, Mexico, and China, with the intention of reducing trade deficits and addressing national security concerns. In the past two weeks, the administration has intensified its trade policies by imposing a 25% tariff on imported automobiles and certain automotive parts. Announced on 26th March 2025, these tariffs are set to take effect on 2nd April 2025 and are expected to significantly impact both foreign automakers and domestic companies that rely on global supply chains. Consumers may face increased vehicle prices, with estimates suggesting potential increases of up to $12,500 per imported vehicle. ​Concurrently, the Federal Reserve has maintained the federal funds rate at a target range of 4.25% to 4.50%. The decision reflects the central bank's cautious approach amid rising inflation and economic uncertainties exacerbated by ongoing trade tensions. Policymakers are holding onto their pace of two rate cuts as projected at the beginning of 2025. The Fed also highlighted that tariffs make their decisions more difficult, as it likely alters the inflation rate. These developments have introduced considerable volatility into financial markets. Major US stock indexes have experienced declines, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all posting losses amid investor concerns over inflation and the potential for an economic slowdown. As of the time of writing, the Dow Jones is down 2%, the S&P 500 5%, and the Nasdaq 100 8% in 2025. The recent announcement of automotive tariffs also led volatility spike again after recovering from the initial shock in early March, as shown in Figure 1. Higher than expected inflation data for February is also affecting equity markets negatively. Due to this global uncertainty, gold prices have surged to record highs, with spot gold reaching approximately $3,086.70 per ounce. Investors are increasingly turning to gold as a safe-haven asset, reflecting heightened apprehension regarding the stability of the global economy. Figure 1: YTD Performance of Major US Indices and the Development of VIX in 2025, Sources: Investing, March 2025 STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Dubai and Umm Al Quwain in United Arab Emirates and Tallinn in Estonia. 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