After a strong start to the year, March has clearly slowed down, with the European equity market (Stoxx 600) experiencing its biggest drop since September 2022, down 3.8%. Meanwhile, the American market has taken an even bigger hit, with the S&P 500 falling by 9.3% and the Nasdaq dropping 11.7%, officially entering correction territory.
Beyond the layoffs in U.S. federal agencies and the freeze on operating expenses, which are indeed affecting the broader economy, investors have grown increasingly concerned about Trump’s final decision on tariffs that was expected on April 2. The latest data on inflation in the United States is also quite concerning, and the clear downward trend we saw since 2022 seems to be losing momentum. The latest report on manufacturing activity indicators also shows a slowdown, which has been intensified by the uncertainty surrounding Trump’s erratic government policies. It’s a complete cycle. It’s now clear that the constant show of fireworks we’ve been experiencing for over two months needs to stop as soon as possible. The European market will not hold fast if our neighbours across the Atlantic fall into a recession.
In his famous 1987 book, The Art of the Deal, Donald Trump, who was then just a New York real estate developer, shared his approach to business : “I keep my options open for as long as possible.” However, what works on a small scale can be detrimental when you’re in charge of a vast country like the United States and responsible for its economy. Today, investors and consumers need clarity, stability, and consistency. Let’s hope their voices are heard.
On the European side, both the German and Commission-led plans for military investment are making good progress. They are likely to help cushion the impact of the automotive tariffs that will significantly affect German manufacturers and suppliers. However, will they be enough to boost growth in Germany and offset the challenges coming from the U.S.? It’s too early to tell. Meanwhile, negotiations regarding Ukraine are progressing very slowly, but at least the situation in the conflict doesn’t seem to be getting worse.
The best symbol of the shift in atmosphere we’re witnessing is undoubtedly Tesla’s stock price. After doubling at the end of 2024 in response to Musk’s bold and successful political gamble, it has dropped by half since the beginning of the year. European drivers, in particular, seem to be responding to JD Vance’s insults by ignoring Tesla dealerships. As a result, we will steer clear of this stock, which may be the best example of what is known as key person risk. Musk’s involvement in federal politics, regardless of what one thinks about its validity, is at odds with his role at the helm of the company and makes the latter uninvestable from our perspective. We adhere to this kind of discipline to prevent our investors from experiencing irreparable capital losses.
Most Clartan funds experienced a decline in March. The Valeurs fund dropped by 3.7%, Europe by 3.4%, and Ethos by 4.3%. However, the defensive funds fared better, with Flexible down by 1.8%, Patrimoine down by 0.6%, and Multimanagers remaining unchanged at 0%.
