Market Outlook - January 2025

While it is customary for us in this section of the commentary to provide insight over the coming weeks about the markets in general, we find it extremely difficult to do so in this current environment. With the recent developments regarding tariffs, the outcome is entirely out of our control and completely in the hands of the politicians. While on the one hand, our longer-term price forecast for the TSX and S&P 500 remains unchanged, any short-term predictions are impossible. It is easy to assume there will be increased volatility and with that we feel prepared.

With regards to the economy, BMO Economics has revised its outlook for the Bank of Canada’s interest rate cuts in response to the 25% tariffs imposed on Canada. The schedule is now presumed to be a series of six consecutive quarter-point interest rate cuts, bringing the policy rate down to 1.5% by October this year. This shift in policy will help support the impact on supply chains, and increased costs for Canadian businesses and consumers, and reduce the shock to economic growth which could potentially equate to a -2.5% hit to GDP and a 1% increase to inflation. These rate cuts will also influence the Canadian dollar and put more downward pressure on the currency.

Our hope is that cooler heads will prevail and that the politicians will workout a deal with as little disruption to the economy as possible. There is a strong chance the tariffs that were put in place on Feb 1st will be short lived, should negotiations produce the desired outcome. It is key that we navigate this situation with a measured, long-term approach. Should the tariffs remain in place for an extended period, the markets will adjust and create new opportunities as businesses reposition. Our main priority in the face of this new challenge is the preservation of our client’s capital and maintaining consistent cashflow.

If you would like to receive a full copy of the January 2025 market commentary, please email us at msbwealth@nbpcd.com