Global equity markets were mixed in the first quarter. Early optimism about the incoming Trump administration’s likely business-friendly policies faded amid concerns that import tariffs on major trading partners would potentially lower economic growth and lead to higher prices of goods sold in the U.S., thus contributing to inflation pressures. High-growth stocks retreated in light of lofty valuations and expectations, as well as perceptions that lower-cost competition from China’s artificial intelligence developer DeepSeek could pose new competitive risks. In Europe, equity markets were mostly positive in dollar terms, helped by expectations for eurozone spending on defense and infrastructure to increase, particularly in Germany. Emerging equity markets rose but trailed stocks in developed international markets in U.S. dollar terms. However, Chinese shares had a strong quarter, lifted in part by hopes that fiscal and monetary stimulus would lead to increased consumption and stronger economic growth.
Global fixed income markets were mostly positive in the first quarter. U.S. Treasury bill yields were little changed as the Federal Reserve held short-term interest rates steady while other major central banks cut rates, but investment-grade bond returns were positive as intermediate-term U.S. Treasury yields declined amid worry over slowing economic growth. High yield corporate bonds produced modest gains but underperformed investment-grade bonds. In dollar terms, bonds in developed international markets produced positive returns as non-U.S. currencies strengthened versus the dollar. In the eurozone, longer-term bond yields increased in various countries, particularly in March, in response to the German government’s plans to ramp up infrastructure and defense spending.
Benchmark Performance
EQUITIES
QTD (%)
YTD (%)
Domestic Stocks – All Cap
Russell 3000 Index
-4.72
-4.72
Domestic Stocks – Large Cap
Russell 1000 Index
-4.49
-4.49
International Stocks – Developed and Emerging Markets MSCI All Country World Index ex USA Net
5.23
5.23
International Stocks – Developed Markets MSCI EAFE Index Net
6.86
6.86
FIXED INCOME
Domestic Bonds – Investment Grade Bloomberg U.S. Aggregate Bond Index
2.78
2.78
Domestic Bonds – Short-Term Investment Grade Bloomberg U.S. 1–5 Year Treasury TIPS Index
3.40
3.40
Domestic Bonds – Ultra Short-Term Investment Grade FTSE 3-Month Treasury Bill Index
1.10
1.10
OUTLOOK
Global equity and fixed income markets faced continued turbulence during the quarter due to fiscal changes in Europe, where monetary policy has continued to ease. Meanwhile, volatility spiked up as shifts in the United States' foreign policy landscape related to tariffs made waves across global markets. We maintain a cautious stance on U.S. stocks relative to international developed markets given elevated valuations and a more challenging fiscal environment characterized by uncertainty relating to the new tariff policies. On the other hand, we are more bullish on international markets, notably in Europe where accommodative monetary policy coupled with recently passed fiscal measures provide a favorable backdrop. We believe this should benefit value-oriented sectors given supportive factors including an improving profit outlook, a positively sloped yield curve, and a constructive credit environment. Key risks to global markets include high valuations, tariff concerns, inflation, and the impact of geopolitical developments, including the ongoing conflict in Ukraine and China's economic policies. We remain vigilant in monitoring the economic landscape as we seek compelling investment opportunities moving forward.
The views expressed are as of the indicated date, are subject to change without notice, and may differ from those of other T. Rowe Price associates. Information and opinions are derived from proprietary and nonproprietary sources deemed to be reliable; the accuracy of those sources is not guaranteed. This material does not constitute a distribution, offer, invitation, recommendation, or solicitation to sell or buy any securities; it does not constitute investment advice and should not be relied upon as such. Past performance does not guarantee future results. Diversification cannot assure a profit or protect against loss in a declining market. Review index definitions at https://www.troweprice.com/personal-investing/advice/activeplus-portfolios/performance.html#index-definitions. An investor cannot invest directly in an index. Visit our glossary at https://www.troweprice.com/en/us/glossary for a list of financial terms and their definitions.
MARKET RECAP
Tariffs Take their Toll on U.S. Equity Markets
Global equity markets were mixed in the first quarter. Early optimism about the incoming Trump administration’s likely business-friendly policies faded amid concerns that import tariffs on major trading partners would potentially lower economic growth and lead to higher prices of goods sold in the U.S., thus contributing to inflation pressures. High-growth stocks retreated in light of lofty valuations and expectations, as well as perceptions that lower-cost competition from China’s artificial intelligence developer DeepSeek could pose new competitive risks. In Europe, equity markets were mostly positive in dollar terms, helped by expectations for eurozone spending on defense and infrastructure to increase, particularly in Germany. Emerging equity markets rose but trailed stocks in developed international markets in U.S. dollar terms. However, Chinese shares had a strong quarter, lifted in part by hopes that fiscal and monetary stimulus would lead to increased consumption and stronger economic growth.
Global fixed income markets were mostly positive in the first quarter. U.S. Treasury bill yields were little changed as the Federal Reserve held short-term interest rates steady while other major central banks cut rates, but investment-grade bond returns were positive as intermediate-term U.S. Treasury yields declined amid worry over slowing economic growth. High yield corporate bonds produced modest gains but underperformed investment-grade bonds. In dollar terms, bonds in developed international markets produced positive returns as non-U.S. currencies strengthened versus the dollar. In the eurozone, longer-term bond yields increased in various countries, particularly in March, in response to the German government’s plans to ramp up infrastructure and defense spending.
Benchmark Performance
Russell 3000 Index
Russell 1000 Index
MSCI All Country World Index ex USA Net
MSCI EAFE Index Net
Bloomberg U.S. Aggregate Bond Index
Bloomberg U.S. 1–5 Year Treasury TIPS Index
FTSE 3-Month Treasury Bill Index
OUTLOOK
Global equity and fixed income markets faced continued turbulence during the quarter due to fiscal changes in Europe, where monetary policy has continued to ease. Meanwhile, volatility spiked up as shifts in the United States' foreign policy landscape related to tariffs made waves across global markets. We maintain a cautious stance on U.S. stocks relative to international developed markets given elevated valuations and a more challenging fiscal environment characterized by uncertainty relating to the new tariff policies. On the other hand, we are more bullish on international markets, notably in Europe where accommodative monetary policy coupled with recently passed fiscal measures provide a favorable backdrop. We believe this should benefit value-oriented sectors given supportive factors including an improving profit outlook, a positively sloped yield curve, and a constructive credit environment. Key risks to global markets include high valuations, tariff concerns, inflation, and the impact of geopolitical developments, including the ongoing conflict in Ukraine and China's economic policies. We remain vigilant in monitoring the economic landscape as we seek compelling investment opportunities moving forward.
The views expressed are as of the indicated date, are subject to change without notice, and may differ from those of other T. Rowe Price associates. Information and opinions are derived from proprietary and nonproprietary sources deemed to be reliable; the accuracy of those sources is not guaranteed. This material does not constitute a distribution, offer, invitation, recommendation, or solicitation to sell or buy any securities; it does not constitute investment advice and should not be relied upon as such. Past performance does not guarantee future results. Diversification cannot assure a profit or protect against loss in a declining market. Review index definitions at https://www.troweprice.com/personal-investing/advice/activeplus-portfolios/performance.html#index-definitions. An investor cannot invest directly in an index. Visit our glossary at https://www.troweprice.com/en/us/glossary for a list of financial terms and their definitions.
202504-4398935