Market Outlook - March 2025

The idea of a global trade war is a distressing thought, especially since things were headed for what can be described as a ‘goldilocks’ scenario, with respects to interest rates, global GDP, corporate earnings and market return expectations. Off the back of two double digit performance years, for growth and balanced investors alike, we were confident a three-peat was in the cards. The bottom line is that the introduction of tariffs will reduce overall global growth. The result is anyone’s guess, and the predictions are all over the map. Wait an hour and we can give you an update. The situation is obviously very fluid. Even as we write, a positive announcement has sent the markets surging upwards. Nevertheless, with the increased uncertainty introduced into the mix we feel it necessary to adjust our outlook for both the TSX and S&P 500 this year. Where previously we forecast a price target of 28,500 for the TSX, a more prudent target of 26,500 better represents the difficulty Canada will face in the USMCA renegotiations. In addition, a more sobering forecast for the S&P 500 of 6,100 instead of 6,700 would effectively put the Canadian index ahead of the U.S. index this year.

Although, Canada as a country faces a very real challenge with its leadership up for grabs at the end of April, the TSX still exhibits strong relative value. A combination of returning equity flows, and overall broadening performance has set the stage for the index to outperform the S&P 500 in 2025. It is important for investors to set aside their emotions, in particular, their ‘fear’ in times of large drawdowns and look beyond the short-term pain. As our Chief Equity Strategist, Brian Belksi points out, “the TSX tends to post some of its strongest 3-month and 12-month returns after these types of large 1-day and 2-day drawdowns.” He goes on to state that as far back as 1976, the TSX typically posts positive returns 3 months after the market enters correction territory. This means statistically, by the end of Q2 the TSX should be back in the black.  In the meantime, turn off the news and give your nerves a break. Stay calm and stay positive. This will pass and the markets will once again return to new highs.

If you would like to receive a copy of our March 2025 market commentary, please email us at msbweath@nbpcd.com