
Market Wrap Up
Ashley Gardyne, chief investment officer, at Fisher Funds, on how geopolitical tensions may create opportunities for investors. Provided by InvestNow.
14 March 2025
While broad global market indices fell only mildly in February, significant shifts took place beneath the surface. Geopolitical risks resurfaced, post-election sector winners reversed course, and investors reassessed growth expectations against stretched valuations. This market slide has accelerated in March, and the sharp divergence we are seeing across regions and sectors may also be starting to create opportunities for investors who can look beyond short-term noise.

A shift in post-election optimism
Following a steady start to the year, market volatility crept back in over February, marking a sharp reversal in some of the post-election optimism. The assumption that a Trump presidency would be a market-friendly tailwind has quickly been tested, with several of the sectors that rallied immediately after the election now under pressure.
Even after posting strong earnings, market darling Nvidia has nose-dived 25 per cent from its January peak, wiping out over $800 billion in value. The broader Magnificent Seven of large-cap US growth stocks has also entered correction territory (down 16 per cent on average). Small-cap US stocks, initially expected to benefit from Trump's "America first" stance, have also struggled and are 6 per cent below where they were on election day and 15 per cent off their December highs (see chart below).
At the same time, the longstanding trend of US market dominance has shifted. Investors are beginning to question whether lofty US equity valuations remain justified, as concerns grow around the economic outlook and signs of strain in consumer confidence. As a result, Europe has outperformed, and Chinese tech stocks have surged – with Alibaba and Tencent are up 66 per cent and 24 per cent respectively year-to-date. This marks a rare departure from the American exceptionalism that has defined much of the past decade.
Ukraine and tariffs – policy uncertainty fuels volatility
At the start of the month, the White House appeared to be using tariffs merely as a bargaining chip, with Trump announcing 25 per cent tariffs on Mexico and Canada, only to suspend them the very next day. However, as the month progressed, the policy outlook became increasingly erratic.
Initially dismissed as political posturing, markets were forced to reassess as it became clear the tariffs were in fact going into effect (and then again delayed!). This kind of unpredictability unsettles markets and has fuelled a bout of volatility in recent days. Beyond the immediate disruption to trade, tariffs have also revived concerns regarding slowing growth and the risk of inflation reaccelerating – a combination that markets are struggling to price in.
Geopolitical tensions also escalated within the Oval Office as February came to an end, with a public spat between Ukrainian President Zelensky and Trump leading to a complete pause in US aid to Ukraine in early March. In response, European leaders have scrambled to assemble defence spending packages, sending European defence stocks sharply higher.
Volatility creates opportunity
While these issues are likely to dominate headlines in the coming weeks, it’s important not to get side-tracked from your long-term investment objectives. History has shown that selling and sitting on the sidelines during periods of uncertainty can prove costly. Geopolitical contention aside, the economic backdrop is still pretty healthy. Globally we have avoided a hard landing in most economies. Inflation is back in, or near, central bank target ranges. And short-term interest rates have been coming down gradually for a year now.
The sort of market divergence we have witnessed so far this year can create opportunities for active investors. While the S&P 500 is only 6 per cent off its all-time highs, and hardly much to get excited about, some parts of the market have fallen further.
The tech-heavy Nasdaq Composite is 10 per cent off its highs and US small caps are down even further. Tesla has fallen 45 per cent from its post-election high, as enthusiasm around Elon Musk’s ties to Trump have faded. While I’m not a fan of the Tesla investment thesis, for those that are, you can now buy the stock at almost half price. Some of last year’s other market darlings, like US power producers Constellation Energy and Vistra Energy (that were supposed to benefit from the AI-driven datacentre buildout) are also off c.40 per cent from their highs. US homebuilders have fallen close to 30 per cent in recent months.
Revisiting your watch list, and less loved parts of the market
As I look down the watchlist of high-quality companies I monitor, there are companies I have followed for many years whose share prices are c.20 per cent or more off their highs. While some of these valuations may be justified by recent fundamental news, others may present compelling opportunities. Amazon is down 18 per cent, Salesforce -23 per cent, KKR -32 per cent. Some lesser-known US cyclical names like Floor & Décor and NVR Inc are down 33 per cent and 25 per cent respectively.
Investors can often pick up the best opportunities when volatility and selling picks up for macroeconomic or geopolitical reasons, rather than company specific news.
Beyond opportunities caused by the current turbulence, there are also parts of the market that offer more attractive valuations and may be worth considering.
While European stocks have had a strong start to the year, they remain cheap relative to the US. There has been a recent improvement in selected European economic indicators, and European countries may also benefit from increased fiscal and military spending as they look the fill the void left by the US. Likewise, after years of being unloved, UK equities are now at their most attractive valuations in over a decade. Many high-quality UK small-cap companies are outpacing global competitors in earnings growth, yet remain overlooked.
Beyond the Magnificent Seven, broader US equity valuations also remain reasonable. Outside of the most crowded parts of the market, some of the remaining 493 companies in the S&P 500 offer compelling opportunities in our view.
A small correction like we have seen is hardly much to get excited about, but if markets continue to slide opportunities can present themselves quickly and it pays to be prepared.
Taken from InvestNow Market Wrap-Up.
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