In March, global markets were deeply mired in policy uncertainty, urgently seeking new anchor points. U.S. stocks accelerated their valuation reconstruction, and the crypto market was also subject to fluctuations. With the new tariff bomb dropped on April 2, the global trade order faces deep restructuring, compelling countries to urgently adjust their economic policies. The more it is at such a time, the more critical it is to patiently wait. Once the new order is gradually reshaped, market sentiment will also warm up accordingly.
Trump's tariff policy has undergone multiple adjustments in the past March, and on April 2, the Trump administration officially announced the implementation of a 'comprehensive reciprocal tariff' policy—levying a minimum 10% basic tariff on all goods exported to the U.S. and imposing additional tariffs on about 60 countries with significant trade deficits (e.g., 34% for China, 46% for Vietnam, 49% for Cambodia)—ushering in the most intense reshaping of the global trade order since World War II.
Once the news was announced, the market experienced violent fluctuations. U.S. stocks and the dollar fell sharply together, with the dollar index dipping below 104; Nasdaq futures plummeted over 4%, and S&P 500 futures dropped 3.5%. The stocks of the seven major U.S. tech giants saw particularly significant declines, with Apple falling 7.5% in after-hours trading. Funds rushed into safe-haven assets, and the price of spot gold soared, breaking through $3160 per ounce, setting a new historical high.
The tax rate and the scope of this tariff increase far exceed Wall Street's previous estimations. Investors are concerned that the tariff war will ultimately impact the foundation of U.S. economic growth. First is the risk of supply chain disruptions. Targeted tariffs on automobiles, steel and aluminum, and technology products (some rates reaching 25%-50%) force companies to accelerate the regional restructuring of supply chains, sharply increasing costs in the industrial chain. Secondly, there are worries about an inflationary spiral. According to estimates from JPMorgan, after countermeasures are added, the U.S. CPI could be pushed up by 2-2.8 percentage points.
U.S. Consumer Confidence Index (Image source: investing.com)
Moody's chief economist Mark Zandi raised the probability of a recession in the U.S. economy this year from 15% at the beginning of the year to 40%. Goldman Sachs' economist team also increased the probability of a U.S. recession within the next 12 months to 35%. In March, some economic indicators in the U.S. showed a decline; although the non-farm payroll data at the end of March showed that the current unemployment rate is 4.1%, the final consumer confidence index for March dropped from 64.7 in February to 57, a decline from the initial value of 57.9, which was below the economists' median estimate, while the core PCE price index rose 2.8% year-on-year, reinforcing the dilemma of 'slowing economic growth and stubborn inflation'.
The Federal Reserve expressed concerns about economic uncertainty during its March meeting. On one hand, economic growth is showing signs of slowing, with the GDP forecast for 2025 lowered from 2.1% to 1.7%; on the other hand, inflation remains sticky. In this scenario, if a rate cut is chosen, it could further spur price increases; while maintaining high interest rates would increase corporate debt pressure, making the Federal Reserve, caught in a triple storm of inflation, politics, and globalization, face a dilemma in policy decision-making, unable to move in any direction. Thus, we see that in March, the Federal Reserve decided to keep interest rates unchanged at 5.5%.
After the announcement of the new tariff policy on April 2, traders increased their bets that the Federal Reserve would begin cutting interest rates in June and would cut rates a cumulative three times by October (i.e., by 0.75 percentage points). According to Reuters, the probability of a rate cut at the Federal Reserve's June meeting has risen to about 70%, up from around 60% before the tariff announcement.
Meanwhile, the impact of the tariff policy goes far beyond the U.S. domestic economy and the Federal Reserve's monetary policy. Trump's 'reciprocal tariff' plan aims to increase fiscal revenue through tariffs while using it as leverage to force other countries to lower tariffs or make other policy changes. Are other countries willing to cooperate in negotiations? How many concessions can Trump make in negotiations? Currently, major economies in the world are formulating counter-lists, and some analyses suggest that global trade friction is evolving from 'localized conflicts' to 'systemic confrontation'. In the future, the global economy and financial markets will still need to operate under pressure amid this uncertainty.
(Source: https://www.nasdaq.com/)
U.S. stocks continued to decline in March, causing the S&P 500 and Nasdaq to finish the first quarter of 2025 down 8.7% and 12.3%, respectively, marking the largest quarterly decline since 2022. Over a longer timeframe, since Trump's election as U.S. president in November 2024, the S&P 500 index has fallen from 6200 points to 5572 points, a drop of over 10%, evaporating $4 trillion from its peak.
(Image source: The New York Times/Karl Russell)
In the past two years, U.S. stocks have attracted global capital due to 'TINA' (There Is No Alternative to equities), accounting for over 50% of the global stock market capitalization. During periods of market prosperity, investors' optimism towards U.S. stocks continually pushed up stock prices, ignoring potential risks. However, with the evolution of the economic cycle, this deviation from fundamental valuation has become increasingly difficult to sustain, and institutional optimism towards U.S. stocks is being corrected: Goldman Sachs has lowered its year-end target for the S&P 500 from 6500 to 6200 points, citing 'tariff risks and slowing profit growth'; Morgan Stanley has warned that 5500 points may be the starting point for a technical rebound, but it requires corporate profits to hit bottom for support. This adjustment reflects the market's skepticism towards the 'profit-driven' logic of U.S. stocks—expected profit growth for the S&P 500 in 2025 has been revised down from 11% to 7%, while the profit growth advantage of the seven tech giants is narrowing, with the gap from S&P 493 reduced from 30 percentage points to 6 percentage points.
Meanwhile, the confusion in U.S. policy signals further exacerbated market panic. Trump urged the Federal Reserve to cut interest rates while not ruling out the possibility of an economic recession; White House officials downplayed recession risks on one hand while acknowledging transitional pains on the other. Such contradictory statements left investors at a loss, severely undermining market confidence, and prompting a swift reaction to policy uncertainty, with the 'big 7' (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla) being the first to face a wave of sell-offs; Tesla fell nearly 36% in the first quarter, and Nvidia dropped nearly 20%. As an important component of the S&P 500, the 'big 7' has seen a cumulative market value evaporate by over $2.5 trillion since Trump's re-election, which is both a correction of the earlier valuation bubble (S&P 500 P/E ratio of 21 times) and a 'vote with feet' against policy uncertainty.
By the end of March, U.S. stocks rebounded somewhat, with the S&P 500 rising to 5767 points, reflecting market expectations of 'policy softening'; that is, the White House might adopt a phased or exemption strategy rather than a full-scale tax increase. However, it turned out that the market's optimistic expectations at that time were misplaced.
It is worth mentioning that under the dynamic interplay of interest rate cut expectations, tariff intensity, and recession risks, some institutions have clearly indicated that the risk-reward ratio of making unilateral bets on U.S. stocks has significantly deteriorated. For example, AQR Capital Management has warned investors that in this environment, they need to rely more on diversification strategies than ever before and should not blindly bet on a unilateral rise in U.S. stocks.
The S&P 500, Nasdaq, and 'big 7' all fell in the first quarter, and Bitcoin also faced the dual impact of market fluctuations and policy uncertainty. However, amidst the turbulence, its performance remains resilient: after the intense volatility at the end of February, Bitcoin did not experience a unilateral decline in March but showed a 'V-shaped' fluctuation with initial dips followed by gains. The monthly decline narrowed to 2.09%, significantly better than Nasdaq's 8.2% decline during the same period. Over a relatively long period, Bitcoin's trajectory has closely mirrored that of tech stocks, often rising and falling together. However, during this market turmoil, Bitcoin charted an independent course.
(Image source: investing.com)
Especially in mid to late March, as the U.S. SEC abolished SAB 121 (allowing banks to custody crypto assets) and institutions like BlackRock increased their holdings, coupled with the Federal Reserve signaling 'three rate cuts within the year' on March 20, Bitcoin experienced a strong rebound. Overall, the adjustment of Bitcoin in March was more of a technical correction rather than a trend decline. Grayscale's research director Zach Pandl believes that the negative impact of tariffs on the market has been partially 'priced in', and the worst phase of selling may have ended.
Although the current crypto market is still overshadowed by the latest tariff policy, the U.S. government's recognition and regulatory progress in the field of crypto assets have become increasingly clear, and a series of measures are paving the way for the industry's long-term development: first, on March 6, Trump signed an executive order to formally establish a 'Strategic Bitcoin Reserve' (SBR), incorporating approximately 200,000 BTC previously confiscated by the federal government into reserves, with a clear commitment not to sell for four years. This is the first time the U.S. government has managed Bitcoin as a permanent national asset, marking the establishment of its status as 'digital gold'. Although this executive order is not legislation, it lays the groundwork for subsequent policies.
Secondly, the SEC is gradually relaxing its historically tough stance on cryptocurrencies, having held its first cryptocurrency roundtable in March and planning to host four more roundtables in April, May, and June regarding trading, custody, tokenization, and DeFi. This shift is seen as a key prelude to the establishment of a regulatory framework, moving from 'enforcement-based' to 'cooperation and rule-making'. Notably, the SEC's announcement to abolish SAB 121 means banks can finally legally custody crypto assets; after the abolition of SAB 121, traditional financial institutions like JPMorgan and Goldman Sachs have immediately launched crypto custody services, with expectations that over $200 billion in institutional funds will enter through banking channels by Q2 2025.
BlackRock CEO Fink's annual investor letter (Source: https://www.blackrock.com/corporate/investor-relations/larry-fink-annual-chairmans-letter)
Institutional investors' enthusiasm for crypto assets, especially Bitcoin, continues to rise. On March 31, Larry Fink, CEO of the world's leading asset management firm BlackRock, released a 27-page annual letter to investors. In the letter, Fink issued a rare and serious warning: if the U.S. cannot effectively manage its expanding debt and fiscal deficit, the dollar's decades-long position as 'the global reserve currency' could very well be replaced by emerging digital assets like Bitcoin. Notably, Fink mentioned Bitcoin seven times and the dollar eight times in his letter, highlighting Bitcoin's importance in the current financial context and hinting at its potential key role in the evolution of the global economic landscape.
With the implementation of Trump's tariff policy on April 2, the outlook for the U.S. economy became increasingly murky. If the U.S. economy does not fall into a deep recession under the tariff policy, and if the Federal Reserve cuts interest rates in June, Bitcoin is expected to witness a trend reversal in the second quarter. During unstable economic times, Bitcoin's scarcity and safe-haven attributes will become increasingly prominent. Once market risk appetite rebounds, Bitcoin, as an emerging asset class, meets the potential demand for new safe-haven and value storage methods, and is likely to break through key resistance levels first, leading to a re-evaluation of its value.
In March, the market swung between 'stagflation worries' and 'policy easing', and in the long term, if the tariffs lead to inflation and erode the dollar's credibility, it will force funds to shift to non-sovereign assets. BlackRock CEO Fink posed the question in his investor letter: 'Will Bitcoin challenge the dollar's hegemony?' This is not without reason; he reminds us that the most disruptive variable in reshaping the new global financial order has already emerged.
