Portfolio Managers’ Brief: April 2025

Key Takeaways April 2025


Market Volatility and Rebound

Markets experienced sharp declines followed by a historic rebound:

• Major indices fell ~10% but surged on April 9th after Trump’s tariff reversal.
  
  
• TSX outperformed globally due to exposure to defensive sectors.
  
  
• SPX, NDX, and DIA staged significant single-day recoveries, with Nasdaq rallying 12%.

Canadian Fixed Income Stability

• Despite economic concerns, Canadian bonds held up well.
  
  
• Bank of Canada cut rates to 2.75% in March to counter recession risks.
  
  
• Job losses and rising business uncertainty are prompting investor caution ahead of the April 16 rate decision.

Market Drivers: Tariffs & Recession Fears

• Trade Tensions: U.S. hiked Chinese tariffs to 125%, paused broader increases for 90 days, triggering a global rally.
  
  
• Recession Risks:
  • Warnings from Lawrence Summers and rising recession probabilities from Goldman and JPMorgan.
    
    
  • Potential for job losses and reduced household incomes.

Understanding Tariffs & Trade Deficits

• Tariffs: Taxes on imports that aim to boost domestic production but may raise consumer prices.
  
  
• Trade Deficit: Occurs when imports exceed exports—Trump sees this as an imbalance requiring correction.
  
  
• The policy risks include retaliation, supply chain disruption, and slower economic growth.

Sector Performance Breakdown

Struggling Sectors:

• Technology, Consumer Discretionary, and Industrials due to global uncertainty and reduced consumer spending.

Resilient Sectors:

• Utilities, Consumer Staples, Healthcare, and Canadian Financials—favored for income, stability, and rate dynamics.

Political Developments in Canada

• Federal Election Called for April 28:
  
  
  • Liberals (Carney): Focus on trade diplomacy and diversification.
    
    
  • Conservatives (Poilievre): Emphasis on tax relief and stricter spending controls.
    
    
  • NDP & Bloc: Advocating for social protections and stimulus.
    
    
• Market sentiment is currently supportive of Carney’s leadership, but political uncertainty remains.

Portfolio Positioning Strategy

• Portfolios shifted defensively early in the year—more fixed income and dividend stocks.
  
  
• Rebalanced technology holdings after oversold signals to capture rebound opportunities.
  
  
• Continued focus on global diversification and capital preservation.

Timeless Investing Principles

• Stay Calm, Think Long-Term: Focus on business value, not short-term swings.
  
  
• Don’t Follow the Crowd: Independent thinking leads to better outcomes than emotional reactions.
  
  
• Embrace Volatility: Market dips offer chances to buy quality assets at lower prices.

Final Thoughts

Q1 2025 has been volatile but manageable. The focus remains on protecting capital and positioning for long-term growth.