March 28, 2025: Global Markets Diverge as Trade Tensions Spike—Navigation Guide for Q2

Hook

While international markets surge (MSCI EAFE +7.3% YTD), U.S. equities stumble amid fresh 25% auto tariffs and PCE inflation surprises. Here's your roadmap through the mounting cross-currents shaping Q2 2025.

Core Analysis

Key Developments

  • Core PCE inflation reached 2.6% against expectations of 2.5%, while Q4 GDP saw a revision to 2.4%
  • The auto sector was jolted by new 25% tariffs, sending GM (-7.3%) and Ford (-3.9%) tumbling, while Tesla showed resilience with a 0.4% gain
  • Gold achieved a new record of $3,061/oz as investors seek safe-haven assets amid mounting uncertainties

Market Leaders/Laggards

  • International markets demonstrate remarkable strength, led by Hong Kong's Hang Seng (+23.05%) and Germany's DAXK (+15.29%)
  • U.S. tech and consumer discretionary sectors face significant headwinds, with the Nasdaq 100 down 2.69%
  • Fixed income markets witness yield curve steepening, with the 5s30s spread reaching levels not seen since 2022

Strategic Playbook

Short-Term (Traders)

  • Consider tactical pair trades: Long international ETFs (HEDJ, DXJ) against U.S. auto sector shorts
  • Monitor oversold conditions in quality tech names for potential entry points
  • Watch emerging market opportunities, particularly in China, Korea, and Brazil, which are showing strength against U.S. equities

Long-Term (Investors)

  • Increase strategic international allocation, with focus on developed markets showing momentum
  • Review gold position sizing given record prices and persistent geopolitical risks
  • Consider private credit exposure as the sector approaches $2.8 trillion by 2028

Forward Outlook

Catalysts

  • Upcoming S&P Global Composite PMI release (previous: 51.6)
  • April 2 implementation of Venezuelan crude tariffs
  • Potential diplomatic negotiations between EU-US on auto tariffs
  • Key economic indicators: Chicago PMI, ISM Manufacturing PMI, and April 4 nonfarm payrolls

Risk Radar

  • Potential trade tension escalation into pharmaceuticals and technology sectors
  • Stagflation risks amid mixed economic data and trade policy impacts
  • Federal layoffs potentially affecting up to 1 million workers
  • Volatility patterns similar to 2018 trade policy environment

Data as of March 28, 2025. Past performance does not guarantee future results.

Sources:

Data compiled from RCM Capital Management Global Markets Report, Advisor Perspectives World Markets Watchlist, Saxo Bank Market Analysis, Morgan Stanley Capital Markets Outlook, and Schwab Market Update (March 28, 2025).