The current macroeconomic landscape is causing high uncertainty and confusion for investors. If you missed our recent webinar on how to navigate the markets in 2025, here’s a summary of the main points made by Omer Chowdhry, an experienced portfolio manager at, Aditum Investment Management Limited (“Aditum”), one of Infinity’s strategic investment management partners.
The current landscape of policy uncertainty
Since Trump was inaugurated in January, the macroeconomic landscape has been characterised by high uncertainty, causing stress and confusion for investors. While market sell-offs and drawdowns have occurred over the past 15 to 20 years, the factors driving this downturn are notably different.
Global capital shifts in 2025
At the start of 2025, the US stock market dominated the global equity market with a 49% market share worth $60trillion. The economy was outperforming expectations, fuelled by strong consumer spending and a tight labour market. Tech and AI-driven stocks, particularly the ‘Mag 7’ (Google, Microsoft, Meta, Nvidia, Tesla, Amazon, Apple), had driven a 50% surge in the S&P 500 over two years.
However, early optimism in the new US administration, encouraged by promised tax cuts and deregulation, soon waned. Instead, Trump’s trade policies—including an announcement of 25% tariffs on Mexico and Canada and two consecutive 10% tariffs on China in addition to threat of general reciprocal tariffs across the board—spooked investors, triggering a sell-off in “overvalued” US stocks, particularly in tech.
The US share of global markets has dropped by approximately $7 trillion since mid to late February, a trend likely to persist until the risks surrounding tariffs become clearer. However, Trump’s inconsistent stance on tariffs—both in their implementation and justification—has fuelled a storm of uncertainty. This has been further exacerbated by DOGE’s shutdown of key departments and institutions, mass layoffs, rising unemployment risks and policy ambiguity on immigration and Ukraine.
The S&P 500 is down 5-6% year-to-date, while the Nasdaq has fallen 7-8%, or 10% from its peak, in an unusually short timeframe.
In contrast, global capital has been shifting to Europe and China. European markets have rallied due to attractive valuations, potential rate cuts, and fiscal stimulus measures. Meanwhile, China has reversed its crackdown on the tech sector and implemented fiscal measures to boost domestic consumption. The Hang Seng Tech Index has surged over 30% this year.
This graph illustrates the contrasting trajectories of US and Chinese tech stocks, highlighting the effect of China’s ongoing transition from a trade-driven to a tech-based economy.
While the current market volatility will abate at some point, Omer Chowdhry predicts further downside in US equities until there is some clarity on the policy front. Money may continue to be rerouted to Europe, China and other assets that are perceived as “safe” by international investors.
Safe havens in times of economic volatility: Treasury bonds and gold
Treasury bonds
One key refuge is US Treasury bonds, which tend to rise in value as economic growth prospects weaken. Long-end Treasury yields, particularly the 10-year yield, have declined, making them a natural hedge for portfolios exposed to US risk.
Amid the current equity sell-off, savvy investors and fund managers—including Aditum—are increasingly turning to US Treasuries as a defensive strategy. The graph illustrates this trend.
Gold
Gold is at an all-time high this year, on top of stellar returns in 2024, boosted by high demand from central banks, especially the Bank of China, and fund managers seeking a safety hedge in their portfolios. The chart shows the divergence between gold and the S&P 500. Aditum has increased its gold positions as part of a diversified investment approach. While gold has performed well recently, future performance remains subject to market conditions.
Tech and AI: a temporary reset
The tech and AI sectors, which thrived in 2023 and 2024, have been hit by recent market shifts. However, as the chart shows, long-term growth predictions remain strong.
Recent valuations have surged ahead of fundamentals and are now undergoing a necessary correction amid macroeconomic uncertainty, with potential for further downside. Yet, this is far from the end of the US tech rally – these sectors are poised for strong future earnings growth.
Should valuations become more attractive, Aditum would consider reinvesting to seek to capitalise on possible gains.
2025 market adjustments: a summary
In response to the current macroeconomic landscape, we are witnessing the following trends in the markets:
- Reduction in equity exposure: Given the heightened uncertainty, many have scaled back their equity holdings to minimise risk.
- Shift from US to European and Chinese stocks: As concerns grow over the US market, capital is being reallocated to European and Chinese equities, where opportunities are perceived as more attractive.
- US tech stock sell-off: The overvalued tech sector has seen significant pullbacks, prompting investors to reduce their exposure to US tech stocks.
- Flight to safety: Investors have increasingly turned to safer assets, such as Treasury bonds and gold, to protect their portfolios from volatility.
These adjustments have been implemented across Aditum’s moderate and adventurous multi-asset funds, which cater to different risk profiles. The moderate fund follows a 60:40 equity to fixed income neutral split, while the adventurous fund maintains a 75:25 neutral split. Currently the positioning stands as follows:
Source: Aditum Investment Management Limited as of 10th March 2025
Investment management: navigating uncertainty
Over the past 15 years, passive investment vehicles have generally outperformed alpha managers. However, Aditum combines this with an active management approach, adjusting assets up or down in response to market conditions. This strategy has helped mitigate losses in its multi-asset funds, cushioning the impact of falling markets since the start of the year.
The active management seeks to respond to volatile markets by adjusting asset allocations, delivering added value when it’s needed most. A dynamic asset allocation model quickly adapts to changing conditions, optimising performance across various asset classes, which should provide reassurance to nervous investors. However, no investment strategy can guarantee returns or mitigate all risks.
Remember, volatility and uncertainty are inherent in investing. While they can create fear, they also present opportunities for long-term growth. Experienced fund managers will reinvest in equities when valuations become more attractive, benefiting investors over a 5+ year horizon.
If you’re worried about your portfolio’s performance during this volatile period, schedule a call with one of Infinity’s financial advisers to review your options. They can help you determine whether to ride out the storm with your current investments or make adjustments to your portfolio.
All data sources: Aditum Investment Management Limited and Bloomberg, as of 13 March 2025.
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