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.
- Warnings from Lawrence Summers and rising recession probabilities from Goldman and JPMorgan.
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.
- Liberals (Carney): Focus on trade diplomacy and diversification.
- 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.