It’s hard to believe but the chaos on the markets this week exceeded anything we have seen since the inauguration of Donald Trump. There were two winners though, gold and the Canadian dollar. Bond, equity and commodities all finished lower, despite a strong rally on Wednesday. More on that below.
| Index | Close Apr. 3rd 2025 | Close Apr. 10th 2025 |
| S&P500 | 5,396 | 5,259 |
| TSX60 | 24,366 | 22,951 |
| Canada 10 yr. Bond Yield | 2.95% | 3.26% |
| US 10 yr. Treasury Yield | 3.90% | 4.43% |
| USD/CAD | $1.40976 | $1.39842 |
| Brent Crude | $70.19 | $63.41 |
| Gold | $3,113 | $3,173 |
| Bitcoin | $82,356 | $79,868 |
Source: Trading Economics & Factset
The tariff war was in full swing until Wednesday afternoon, when the Whitehouse announced a 90 day pause on the additional “reciprocal” tariffs. There will still be a broad 10% tariff that applies to most countries. Canada (and Mexico) escaped the 10% additional levy but still have a 25% tariff on autos, steel, and aluminum. China also escaped the 10% tariff; they got hit with a 145% tariff on virtually everything.
There are a lot of theories on what was the impetus to hit the pause button. The one that is most credible, is the sharp rise in US Treasury (bond) yields. While the stock market sell off was causing angst and pain, the bond market had the potential to spark a 2008 style systemic failure. When you are running a $1.8 trillion deficit, it is best to keep the bond vigilantes on side.
Snark aside, US Treasuries have been the go-to safe haven for decades. The market is huge and liquid. However, the fast run-up in yields depressed bond prices and started to put hedge funds offside with the margin clerks. The easiest asset to sell without taking a huge haircut were Treasuries. Selling begets more selling in this type of market. The Treasury market has the potential to become the US’ biggest vulnerability with over $8.5 trillion held outside the country. If there is a major sell-off of treasuries, there will be no winners.
But there is some good news out there. Inflation in the US has dropped to a 5-month low of 2.4% (CPI). This gives the Fed a bit more leeway in their decisions on rates. Goldman Sachs is giving a 65% probability of a recession next year, which argues for lower rates as the economy softens. The flip side is that imported goods will cost more. (A lot more if they come from China)
While we have been (rightly) focused on tariffs this past week, the US is reported to be starting negotiations with Iran on their nuclear program. If the talks go well, then that is a positive step forward. But Iran is negotiating with a gun to its head. The US has moved significant naval and military resources to the region, including B-2 stealth bombers and another carrier group.
Two of the world’s leading fashion houses are joining forces. This week, Prada struck a deal to buy its smaller, but no less fashionable, rival Versace for $1.375 billion. Earlier, Versace CEO Donatella Versace, sister of the founder Gianni Versace, had stepped down from her position. The company had been sold to Capri Holdings (Michael Kors) by the family about 7 years ago, so this is a secondary sale. In what could be a scene from the House of Gucci, Gianni was murdered in Miami in 1997.
At the risk of sounding like a broken record, despite the market volatility portfolios are holding up well. We are allowing cash to build up as dividends and interest flows into the accounts. We are not at the bottom of this market, so will allow it to continue to build for now. At some point we will bottom and there will be buying opportunities. But that time is not now. Let’s keep our powder dry and not lose our heads while everyone else are losing theirs.
On April 9th, 1917, The Canadian Army rose from its trenches to capture Vimy Ridge. In a battle that lasted until April 12th, the Canadians captured all their objectives with a loss of 3,598 killed and 7,004 wounded. Historians attribute the success of the Canadian Corps to technical and tactical innovation, meticulous planning, powerful artillery support and extensive training. This Canadian led and executed attack remains one of our greatest military victories. It is also where, according to many, Canada truly became a nation. Elbows up indeed…..
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
