Growth-Based Global Stocks Fall 4% in March as Investors Flock to Bonds, Gold, and Commodities
The first quarter of 2025 has seen a significant shift in investor sentiment, with growth-based global stocks experiencing a decline of 4% in March. However, this downturn did not go unnoticed by investors, who rapidly sought refuge in bonds, gold, and commodities as they attempted to shield themselves from the rising tide of inflation and slower economic growth.
This phenomenon is not an isolated incident; rather, it represents a broader trend that has been unfolding over several months. The first quarter of 2025 saw exchange-traded funds (ETFs) rake in $296 billion, surpassing the previous first-quarter record of $248 billion set in 2021. This remarkable feat puts ETFs on pace to reach $1.3 trillion in inflows for the full year, according to a report from State Street Global Advisors.
The surge in ETF inflows is a clear indication that investors are growing increasingly concerned about inflation and slowing growth. The uncertainty surrounding the Trump administration’s tariff policies has created market volatility, challenging U.S. equity dominance and prompting investors to reevaluate their portfolios.
While equities attracted $67 billion in March, U.S. sectors experienced $3 billion in outflows as investors reduced risk and looked overseas for opportunities. In contrast, European exposures garnered $6 billion, their second-highest inflow on record. This marked a significant shift in investor sentiment, with many now favoring international markets over domestic ones.
Bond ETFs Experience Significant Growth
The bond market has also seen significant growth, with bond ETFs collecting $22 billion in March. Investors have been drawn to ultra-short government bond ETFs ($7 billion) and inflation-linked bond ETFs ($2 billion), as they seek defensive positions and inflation protection. This trend is likely driven by investors’ growing concerns about inflation, which has become a pressing issue for many economies.
The rise of bond ETFs can be attributed to their unique ability to provide liquidity and flexibility in times of market uncertainty. By allowing investors to buy and sell shares that track the performance of bonds, these funds offer a convenient way to manage risk and capitalize on opportunities.
Gold ETFs Attract Significant Inflows
Gold ETFs have also experienced significant growth, attracting $6 billion in inflows. This surge is likely driven by investors’ desire for safe-haven assets, as they seek protection from inflation and economic uncertainty. Gold has long been a popular choice among investors looking to diversify their portfolios and hedge against market volatility.
The first quarter of 2025 saw gold ETFs take in $12 billion, pushing rolling three-month flows for inflation-sensitive markets to their highest level since 2020. This marks a significant milestone, as these funds are now on pace to break the 2024 record of $300 billion in inflows.
Commodity and Active ETFs Experience Rapid Growth
The commodity category has reached a milestone, exceeding $200 billion in assets for the first time. This remarkable feat is driven by strong flows and market appreciation, mainly in gold. The rapid growth of commodity ETFs can be attributed to investors’ growing concerns about inflation and economic uncertainty.
Active ETFs have also experienced significant growth, with assets now around $1 trillion. These funds are on pace for $480 billion in flows this year, surpassing the previous record of $400 billion set in 2024. The strong performance of active fixed-income ETFs is particularly noteworthy, projected to reach $200 billion in inflows—double their 2024 record.
Conclusion
The first quarter of 2025 has seen a significant shift in investor sentiment, with growth-based global stocks experiencing a decline of 4% in March. However, this downturn has not gone unnoticed by investors, who rapidly sought refuge in bonds, gold, and commodities as they attempted to shield themselves from the rising tide of inflation and slower economic growth.
The surge in ETF inflows is a clear indication that investors are growing increasingly concerned about inflation and slowing growth. The uncertainty surrounding the Trump administration’s tariff policies has created market volatility, challenging U.S. equity dominance and prompting investors to reevaluate their portfolios.
As we move forward into the second quarter of 2025, it will be essential for investors to remain vigilant and adaptable in response to changing market conditions. By understanding the trends and patterns that are shaping the investment landscape, investors can make informed decisions and navigate the complexities of the global economy with confidence.