Investing.com -- Global equities ended their worst quarter since 2023, with the MSCI All-Country World Equity Index down 4.4% in March.

U.S. stocks were the hardest hit, as the S&P 500 fell 5.6% during the month and 4.3% for the quarter—its steepest drop since 2022. Escalating trade tensions, rising stagflation fears, and uncertainty over the future of AI monetization weighed heavily on sentiment.

Markets were jolted by faster-than-expected tariff announcements from the U.S. New levies on imports from Mexico, Canada, and China were followed by a 25% tariff on foreign autos.

Another sweeping round of trade measures is expected from the White House on April 2.

“Although investors had been bracing for an increase in trade levies under a second Trump administration, this moved faster and went further than investors had anticipated,” UBS strategists said in a note.

But despite the recent sell-off, UBS maintains a positive outlook on U.S. equities, citing solid economic fundamentals and prospects for tax legislation.

The bank expects the Federal Reserve to cut rates if labor markets weaken and believes that structural growth in AI remains strong.

“Our view is that the news flow will improve in coming months; after the White House announcement on tariffs on 2 April, negotiations can get underway in earnest to soften the blow.”

In this uncertain environment, UBS recommends three investment strategies for 2025.

First, investors should take advantage of U.S. market volatility. The bank expects U.S. equities to outperform globally, driven by robust structural growth, easing tariff risks, and healthy earnings.

UBS suggests “approaches to phase in and buy on dips in broad U.S. equities and companies featured on our ‘AI’ list.”

Second, the firm advises being selective in non-U.S. markets. While Europe and Asia started the year strongly, renewed trade tensions and geopolitical uncertainty may limit gains.

Within Europe, UBS favors names tied to fiscal spending and smaller-cap stocks. In Asia, they highlight Taiwan’s structural appeal and defensive plays in China, alongside long-term potential in the power and resources sectors.

Third, investors should navigate political risk with hedges. Demand for gold is rising, and UBS expects it to continue serving as a safe haven.

“We expect gold, now above $3,000/oz, to continue serving as a hedge against geopolitical and inflation risks.”

Oil, also seen as a geopolitical hedge, is forecast at $80 per barrel by year-end. UBS also encourages capital preservation strategies to balance exposure and manage volatility.