{"id":1920,"date":"2025-04-07T22:20:59","date_gmt":"2025-04-07T22:20:59","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/wagner\/?p=1920"},"modified":"2025-04-07T22:23:23","modified_gmt":"2025-04-07T22:23:23","slug":"last-quarter-in-the-markets-tariff-impacts-and-market-performance","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/wagner\/2025\/04\/07\/last-quarter-in-the-markets-tariff-impacts-and-market-performance\/","title":{"rendered":"Last Quarter in the Markets – Tariff Impacts and Market Performance"},"content":{"rendered":"

Last Quarter in the Markets: January 2 – March 31, 2025<\/strong><\/p>\n

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(source: Bloomberg https:\/\/www.bloomberg.com\/markets<\/a>, MSCI https:\/\/www.msci.com\/end-of-day-data-search<\/a> and ARG Inc. analysis)<\/span><\/p>\n

What happened in the first quarter of 2025?<\/strong><\/p>\n

The most influential event affecting markets was the inauguration of President Donald Trump and his introduction of tariffs on imports into the U.S. Initially described as measures to protect American jobs and security, these tariffs have caused equity markets to reverse their recent success.<\/p>\n

Additionally, the downward trend for inflation has slowed, and in the U.S., it has begun to rise again. With the inflationary effects of tariffs still to be felt, rising prices will likely delay interest rate reductions by both the Bank of Canada and the U.S. Federal Reserve.<\/p>\n

Last Month in the Markets: March 3 \u2013 31, 2025<\/strong><\/p>\n

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(source: Bloomberg https:\/\/www.bloomberg.com\/markets<\/a>, MSCI https:\/\/www.msci.com\/end-of-day-data-search<\/a> and ARG Inc. analysis)<\/span><\/p>\n

What happened in March?<\/strong><\/p>\n

Equities experienced a very difficult month with the Dow losing 4.2 per cent, the S&P 500 dropping 5.8 per cent, and the NASDAQ plummeting 8.2 per cent. Canada\u2019s TSX fell by only 1.9 per cent, making it the top performer among major indexes. A 1.9 per cent drop typically does not count as a success, but in March, the TSX fared much better than American indexes. The allure of the formerly high-flying S&P 500 has lessened as it experienced its worst month since 2022. The much more temperate TSX now leads the U.S. indexes year-to-date and over the past year by remaining in positive territory and returning more than 12 per cent.<\/p>\n

The conditions for this decline after two stellar years for equity index performance are attributed to, and admitted by, Trump. The effects of his proposed and implemented tariffs on imports to the U.S. are well understood by the markets. The cost of tariffs will either be absorbed by firms (lowering their profitability), passed on to purchasers (increasing inflation), or a combination of the two. If lower-cost alternatives existed prior to tariffs, U.S. firms would have utilized those methods. Under a tariff regime, a change in production location will increase costs for a firm. NYT article<\/a><\/p>\n

The price of gold has leapt nearly 20 per cent in 2025 and over 40 per cent over the past year. It continued its reputation as a safe-haven<\/a> investment to protect against losses elsewhere, typically when uncertainty threatens equities.<\/p>\n

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(source: Bloomberg https:\/\/www.bloomberg.com\/markets<\/a>and ARG Inc. analysis)<\/span><\/p>\n

Additional economic reports influenced markets during March:<\/strong><\/p>\n

1. March 6: Interest rate announcement<\/strong><\/p>\n

The European Central Bank (ECB) cut its interest rates by 0.25 per cent (25 basis points), which set its interest rates on the deposit facility, the main refinancing operations and the marginal lending facility at 2.50 per cent, 2.65 per cent and 2.90 per cent, respectively.\u00a0 ECB release<\/a><\/p>\n

2. March 7: Canada and the U.S. \u00a0released employment data for February<\/strong><\/p>\n

In Canada, employment was virtually unchanged (+1,000), and the unemployment rate held steady at 6.6 per cent. The gains found in wholesale and retail trade (+51,000) and finance, insurance, real estate and leasing (+16,000) were offset by declines in professional, scientific and technical services (-33,000) and transportation and warehousing (-23,000). Hourly wages have risen 3.8 per cent on a year-over-year basis.\u00a0 StatsCan release<\/a><\/p>\n

According to the Bureau of Labor Statistics (BLS), U.S. jobs rose by 151,000 in February, which was higher than expected, while the unemployment rate was unchanged at 4.1 per cent.\u00a0 Wages have risen 4.0 per cent over the last year. The latest U.S. jobs data suggests that the next U.S. Federal Reserve rate cut will occur in the second half of 2025. BLS release<\/a>\u00a0 CNBC and jobs<\/a> CME FedWatch<\/a><\/p>\n

3. March 12: Interest rates and inflation<\/strong><\/p>\n

The Bank of Canada reduced its target for the overnight rate again. The announcement<\/a> included, \u201cthe pervasive uncertainty created by continuously changing US tariff threats is restraining consumers\u2019 spending intentions and businesses\u2019 plans to hire and invest. Against this background, and with inflation close to the 2% target, Governing Council decided to reduce the policy rate by a further 25 basis points to 2.75%.\u201d<\/p>\n

U.S. consumer prices increased 0.2 per cent in February, and on a year-over-year basis, the all-items index increased 2.8 per cent before seasonal adjustment. In January, the monthly inflation increase was 0.5 per cent, and the annualized inflation rate was 3.0 per cent.\u00a0 BLS release<\/a><\/p>\n

4. March 14: \u00a0New Prime Minister of Canada<\/strong><\/p>\n

On Friday, Mark Carney, a former central banker, replaced Justin Trudeau as Prime Minister. Unrelated to this change, North American equity indexes rose for the second consecutive Friday.<\/p>\n

5. March 19: Federal Reserve interest rate announcement<\/strong><\/p>\n

The U.S. Federal Reserve kept interest rates steady. The statement<\/a> included, \u201cIn assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.\u201d The U.S. Federal Reserve is watching the effects of the Trump administration\u2019s actions to impose tariffs and trade restrictions, and the resulting responses from sovereign nations affected by the trade war. The U.S. Federal Reserve will continue to maximize employment and return inflation to its long-run target of 2 per cent even as \u201cuncertainty around the economic outlook has increased.\u201d<\/p>\n

6. March 28: U.S. inflation rises, Canadian GDP rises, and leaders talk<\/strong><\/p>\n

Equities initially moved lower again with the U.S. Bureau of Economic Analysis’ release<\/a> of the Personal Consumption Expenditures price index (PCE), which is the U.S. Federal Reserve\u2019s preferred inflation measure. Inflation for February was 2.5 per cent, and Core PCE, excluding food and energy, ticked higher than expected to 2.8 per cent from one year ago. The uncertainty surrounding inflation and tariffs continues to linger and delay CME’s FedWatch prediction<\/a> of lower rates in June and July.\u00a0 CNBC and PCE<\/a><\/p>\n

Canadian Gross Domestic Product (GDP) rose 0.4 per cent in January, a slight increase over the 0.3 per cent increase in December.\u00a0 13 of 20 sectors rose, with goods-producing sectors delivering the largest increase at 1.1 per cent for the first month of 2025. Mining, quarrying, and oil and gas extraction provided the largest increase in January. The largest drag on growth occurred in the retail trade sector, which contracted 0.9 per cent. Tariffs are affecting February growth, when GDP is estimated to be unchanged.\u00a0 StatsCan release<\/a>\u00a0\u00a0 CBC and GDP<\/a><\/p>\n

Upcoming tariff announcements, in addition to last week\u2019s confirmation that imported vehicles would be subject to a 25 per cent tariff, have been hanging over the markets.\u00a0 In the first telephone call between Prime Minister Carney and \u00a0Trump, they discussed economic and security matters as the Canadian federal election looms. Both sides indicated that the call was substantive and constructive, which is welcome news for Canadians and Americans who are directly affected by the trade war.\u00a0 CBC recap of call<\/a><\/p>\n

What\u2019s ahead for April and beyond?<\/strong><\/p>\n

The path of tariff threats and introductions will continue to drive markets. By the end of March, a number of tariff and trade actions had been taken:<\/p>\n