US Capital Market Newsletter – 1Q25

US equity markets declined in 1Q25. The Magnificent 7 and growth sectors underperformed value stocks. US equities also underperformed non-US equities and fixed income. The decline can primarily be attributed to uncertainty around policy decisions and tariffs. US tariffs announced as of April 2 are likely to lead to stagflation and may even cause a recession. Markets expect the US Fed to reduce rates and prioritize growth, rather than targeting the rising inflation caused by tariffs. The US economy is already in a gradual slowdown, with the job market cooling.