In May, North American markets delivered a welcome reprieve for investors, as equities rebounded sharply from earlier-year volatility. The S&P 500 surged with its strongest monthly performance since November 2023, while the Nasdaq Composite also soared higher, due to robust gains in the technology and semiconductor sectors. In Canada, the S&P/TSX Composite Index advanced, bolstered by strength in financials, energy, and materials.
April delivered a classic reminder to investors: volatility isn't a detour from the investment journey - it is the journey. Despite persistent macro headwinds, both U.S. and Canadian markets showed signs of resilience, even as investors grappled with tariff tensions, soft economic data, and shifting rate expectations.
On April 9th, subsequent the preparation of the March 2025 Market Commentary, US President Trump announced a 90-day reciprocal tariff pause on most countries except China. The China tariff was raised to 125%. North American markets rallied almost 10% on the announcement, with Europe and Asia following through on the April 10th. We will have further thoughts in our May commentary.
When unexpected events hit, the almost irresistible urge is to sell first and sort details later – especially when everyone seems set on reducing exposure. Markets had watched for months as tariff threats were made, only to be withdrawn at the last moment. When levies were actually deployed it came as a surprise to many.
Picking up where they left off in 2024, equity markets posted strong gains once again in January. Buoyed by strong corporate earnings and optimism that inflation is getting under control, stocks in both Canada and the US climbed. However, the biggest news during the month was shared by Trump’s tariff intentions for the US’s northern and southern border neighbours (which in early February he ultimately gave a 30-day reprieve for) as well as AI news from Chinese startup DeepSeek who was able to produce an OpenAI competitor at a fraction of the cost. Stocks related to the AI theme fell sharply on the news however, the broader implications can be quite positive from a macro perspective. The mass adoption of AI has the ability to not only increase global economic growth, but also boost labour productivity which has positive implications for corporate profit margins and can act to restrain inflationary pressures. All of these provide positives for continued market growth.
North American equity markets cooled off in December, but still posted their 2nd consecutive annual stellar result in 2024. During December, the Bank of Canada reduced its policy overnight rate by 50 basis points, while the US Federal Reserve (Fed) cut short-term interest rates by 25 basis points. The Fed’s cautious outlook for future 2025 rate cuts created uncertainty for investors resulting in the S&P 500 Index and S&P/TSX to each fall in December.
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