Q1 INVESTOR TRENDS

Q1 uncertainty and unpredictability left many investors on the sidelines, confused and concerned. This led to a return to cash holdings in March. iFlow showed selling out of long positions in U.S. tech and fewer carry trades in emerging markets. Key events in the quarter include: 

• Fiscal stimulus plans in APAC and EMEA countries resulted in steeper yield curves, particularly in Germany. 

• Mood has reversed, with our iFlow Mood index dropping from extremely positive in January, at 0.5%, to extremely negative in March, at -0.3%. 

• The biggest movers were in the U.S., with USD, U.S. shares and U.S. yields all reflecting doubts about U.S. exceptionalism. 

• U.S. equities, particularly the “Magnificent Seven” technology shares, fell into correction territory, down over 12%, while Hong Kong’s Hang Seng index rose 23%.

•  The biggest macro surprise came from Germany, where a new coalition government led by Chancellor Merz of the CDU changed its stance on the debt brake, favoring an increase in spending on defense and infrastructure. This seismic change, coupled with the shift by President Trump on Ukraine and plans for a ceasefire with Russia, led EU nations to move to increase defense spending. 

•  Euro Stoxx 600 rose by 12.5% and EUR rallied from 1.03 to 1.09.

•  China’s “Two Sessions,” the country’s annual planning meeting, and the surprise success of the DeepSeek AI engine led China tech shares higher, raising hopes that the region and Chinese consumers had seen bottom. 

• Emerging markets have varied in their response to Trump’s tariff plans, with the risk of economic stagflation pushed to Q2 and beyond. 

iFlOW MOOD

_{Source: BNY, WM/Refinitiv, MSCI}

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