Global stock markets in the first quarter: US uncer­tainty and European water invest­ment

Beware of the Ides of March: market conside­ra­tions for Q1 2025

Equity markets experi­enced a turbu­lent first quarter, which was charac­te­rized by strong regional diffe­rences. While US equities lost momentum in the face of incre­a­sing political uncer­tainty and the threat of tariffs, European and Japanese markets saw renewed investor interest.

In the US, the optimism of late 2024 has given way to uncer­tainty. Donald Trump’s return to the political stage has led to more confron­ta­tional policies, with tariffs on key imports fuelling fears of a possible trade war. This, combined with concerns about stagfla­tion, has led investors to exit high-growth stocks and invest in more defen­sive, value-oriented segments. Volati­lity jumped in March as mixed signals from Washington unsettled markets. The Federal Reserve kept interest rates steady, signaling increased caution in the face of weaker invest­ment inten­tions and heigh­tened geopo­li­tical risks.

By contrast, Europe has experi­enced a surpri­sing upturn. A historic shift in fiscal policy – in parti­cular Germany’s 500 billion euro infras­truc­ture package and increased defense spending – has revived growth expec­ta­tions. European equities, which have long been overs­ha­dowed by their US counter­parts, are enjoying greater popula­rity again thanks to attrac­tive valua­tions and a stronger euro. Investor senti­ment was further boosted by the supportive tone and interest rate cuts by the European Central Bank.

Japan also benefited from a reallo­ca­tion of capital, despite headwinds from a streng­thening yen. The cautious norma­lization of the Bank of Japan’s policy has kept liqui­dity condi­tions favorable.

China remains a source of uncer­tainty. While there were signs of stabi­lization in early 2025, geopo­li­tical tensions and ongoing doubts about the durabi­lity of policy support continue to cloud the outlook – parti­cu­larly for export-oriented econo­mies such as Europe.

The Tareno Global Water Solutions fund returned

-3.69% in March and ‑3.48% (W‑Euro tranche) in the first quarter.

Our month in the water: Growth despite volati­lity and geopo­li­tical challenges

Volati­lity picked up in the last few weeks of the quarter, which also affected the water universe. Despite the geopo­li­tical turmoil, the funda­mental picture still looks good. Invest­ment in water infras­truc­ture conti­nues to boom. January marked the 35th of 36 months with double-digit year-over-year growth in the US, driven by govern­ment stimulus programs such as ARPA. Meanwhile, industrial produc­tion remains strong, fueled by pull-forward purchases as manufac­tu­rers rush to secure critical compon­ents ahead of expected tariffs. In Europe, too, there is finally a whiff of change, with a push for greater compe­ti­ti­ve­ness and infras­truc­ture invest­ment.

We had the oppor­tu­nity to meet with several compa­nies in March and are confi­dent that our compa­nies’ business models are designed to weather short-term headwinds.

Tetra Tech

Despite initial concerns about the closure of USAID, Tetra Tech has impres­si­vely stabi­lized. Manage­ment is proac­tively redeploying its engineers to high-margin growth areas in various economic sectors, such as chemicals, pharmaceu­ti­cals and aerospace. The company has secured over $650 million in new federal contracts, demon­st­ra­ting that it remains a reliable partner even in a leaner govern­ment environ­ment.

Mueller Industries

We left our meeting with Mueller Industries feeling optimi­stic. Solid pricing power and robust margins support our positive outlook. With nearly $1.1 billion in cash, Mueller is well positioned to make strategic acqui­si­tions or return capital to share­hol­ders, giving the company enviable flexi­bi­lity in a volatile macroe­co­nomic environ­ment.

Georg Fischer

GF’s high degree of localization (92% of US sales are produced locally) protects the company from tariffs. The immediate benefits of the German economic stimulus package are limited, but should improve senti­ment. AI appli­ca­tions are likely to become more strate­gi­cally important, parti­cu­larly in the area of flow manage­ment in buildings and industry.

SIKA

SIKA is coping well with the uncer­tainty thanks to its largely local produc­tion model. While tariffs and infla­tion in the automo­tive-related supply chain pose indirect challenges, the company conti­nues to invest in digital innova­tions and AI tools to increase produc­ti­vity. The German infras­truc­ture fund could offer an upward trend in the medium term.

Sulzer

Sulzer confi­dently confirmed its 2025 targets, expec­ting sales growth of 5% – 8% and EBITDA margins above 15%. Pricing power and strong US manufac­tu­ring capabi­li­ties – parti­cu­larly in pumps and turbo­ma­chi­nery services – put the company in an excel­lent position. Delayed Chemtech orders could provide upside poten­tial in the second half.

Geberit

Geberit posted encou­ra­ging sales growth in early 2025, supported by successful price increases. It remains resilient to tariffs, with AI initia­tives impro­ving opera­tional effici­ency. The recovery in the German construc­tion sector bodes well, and leading indica­tors point to growing demand for plumbing solutions across Europe.

Politics and Strategy: Water Shows Resili­ence

Despite headline-grabbing actions by the US admini­stra­tion – shutting down USAID, raising tariffs and slashing govern­ment budgets – the water sector remains largely untouched. Environ­mental deregu­la­tion under new EPA chief Lee Zeldin is moderate, with minimal changes to core water standards. Infras­truc­ture funding (e.g. ARPA, IIJA) remains intact, provi­ding a stable founda­tion for public sector projects. Although trade tensions may lead to higher input costs, most produ­cers choose to pass on prices rather than relocate produc­tion. For investors, the message is clear: water remains an absolutely central issue – even if Washington wobbles.