“Liberation Day” has come and gone with sweeping tariffs applied around the globe. Markets were not impressed and sold off quickly as the details became known. Losers were equities, oil, commodities, and crypto currencies. Gold held its own while bonds prices rallied on falling yields. The other winner was the Canadian dollar which rallied strongly. As I write this before market open on Friday, yesterday’s sell-off is continuing.
| Index | Close Mar. 27th 2025 | Close Apr. 3rd 2025 |
| S&P500 | 5,695 | 5,396 |
| TSX60 | 25,161 | 24,366 |
| Canada 10 yr. Bond Yield | 3.11% | 2.95% |
| US 10 yr. Treasury Yield | 4.37% | 3.90% |
| USD/CAD | $1.43091 | $1.40976 |
| Brent Crude | $73.94 | $70.19 |
| Gold | $3,057 | $3,113 |
| Bitcoin | $87,254 | $82,356 |
Source: Trading Economics & Factset
There is only one story that counts today, and that is the global tariff war ignited by the Trump administration yesterday. While market reaction has been swift and decisive, the reactions from countries affected by the tariffs has been mixed. Southeast Asia was particularly hard hit with tariffs as high as 49% (Cambodia). China was quick to impose countervailing tariffs of 34%. Canada has taken a more targeted approach, imposing a 25% reciprocal tariff on US autos that matches the US tariff.
The tariffs imposed by the Trump administration are not calculated on existing trade barriers imposed by other countries. Instead, the US has taken trade deficits used them as the basis for the tariffs imposed on other countries. There is a base tariff of 10% applied to everyone (Canada and Mexico avoided that one), then higher tariffs depending on the trade surplus/deficit with the US.
The common refrain around the globe is the need to diversify markets and trading partners. We are facing an extended period of adjustment as supply chains can not be adjusted nor manufacturing facilities built overnight. Despite the turmoil and angst, markets will recover after pricing in this new reality. That said, this is not the time to take on extra risk. We will be sticking to quality, being properly diversified across asset classes and geography. We will also be maintaining and in some cases increasing the use of “alternative” investments that have low or negative correlation to the public equity and bond markets.
In other news, inflation in Germany ticked down perhaps paving the way for more rate cuts by the ECB. I say perhaps because Italy’s inflation rate ticked up slightly, though still within the ECBs target range.
Staying in Europe, French far-right politician Marie LePen has been barred from running for political office for 5 years after being convicted of fraud. She also received a 4-year jail term, with 2 years of it suspended and 2 years to be served with an ankle bracelet (essentially house arrest). Reaction from her supporters (including Donald Trump & JD Vance) has been swift and vociferous.
In a similar story, the impeachment of South Korea’s (now) former president Yoon Suk Yeol was upheld by the country’s courts. He was impeached after trying to impose martial law on the country. Fortunately, South Korea’s democratic institutions held.
OpenAI, the developers of Chat GPT raised $40 billion in new capital in what is the largest capital raise for a private company in history. The lead order on this round was $30 billion from Softbank. The remaining $10 billion was from a consortium that included Microsoft (already a major shareholder). This puts the valuation of the company at $300 billion just behind SpaceX (also private) at $350 billion. This massive raise reminds us that the capital markets are not dead and investors continue to see opportunity.
We have moved on from Toronto to Montreal this week where Laurent is celebrating his 4th birthday. No favourite songs, just a huge fascination with Paw Patrol. I’ll spare you from the pack and leave you with this piece from Les Misérables that reminds us that we can stand up and fight when faced with adversity….. enjoy the weekend
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
