It was a positive week for equities again while the bond market slipped a bit on rising yields. The US dollar strengthened against most major currencies after the US Federal Reserve decided not to lower interest rates. Oil is up slightly on the week and Bitcoin is the winner trading over $100,000 again.
| Index | Close May 1st 2025 | Close May 8th 2025 |
| S&P500 | 5,599 | 5,666 |
| TSX60 | 24,796 | 25,254 |
| Canada 10 yr. Bond Yield | 3.13% | 3.19% |
| US 10 yr. Treasury Yield | 4.22% | 4.38% |
| USD/CAD | $1.38414 | $1.39249 |
| Brent Crude | $61.85 | $63.22 |
| Gold | $3,231 | $3,306 |
| Bitcoin | $96,774 | $103,514 |
Source: Trading Economics & Factset
There were 2 interest rate decisions of note this week. In the US, the FOMC decided to hold rates steady, citing uncertainty and risks to both the upside and downside. The decision was largely priced in and markets are dialling back their expectations of future cuts to interest rates. The central bank is continuing to run off its balance sheet (quantitative tightening) as it remains committed to its 2% inflation target.
In the UK, the Bank of England (BoE) cut its overnight rate by 25-bps to 4.25%. In this case the Bank pointed to slowing growth and a loosening labour market. Inflation has been falling, though it has not reached the 2% target yet. These decisions are made by committee and in this case, it was a split vote, 5 members in favour, 2 wanting a 50-bps cut, and 2 voting for no change.
The US Congress is once again struggling to pass a budget. Despite controlling the Presidency and both houses of Congress, there are not enough votes to pass anything other than stop gap measures. This is not a new conundrum and has been a feature of the US system for some time. In simple terms, everyone wants tax cuts, but no one can agree on which expenditures to cut to offset the loss of revenue. The US deficit is $1.3 trillion or 6.15% of GDP. (Canada’s 2024 deficit was 1.35% of GDP)
There has been some movement on the tariff front, both good and bad. On the plus side, Great Britain and the US have brokered a deal. The agreement is just the framework and there are more details to be worked out before a final deal is signed. Next up are talks between the US & China to take place in Switzerland next week. Expect these talks to be long and contentious.
On the negative side of the ledger was an announcement that there would be a 100% tariff on movies made outside of the US. No one is quite sure how the tariff would work in these days of digital streaming. The film industry generates over $10 billion in revenue in Canada and employs 69,000 people. That revenue and the jobs it creates doesn’t come cheap. The film industry receives generous tax breaks both here and in the US.
Prime Minister Carney met with Donald Trump this week. Their first face to face meeting went as well as can be expected and sets the tone for future negotiations. Carney more than held his own and was able to bat away Trumps musings about a 51st state. Now that the ritual bit of theatre has been performed in front of the cameras, the real negotiations will carry on between the two countries.
Warren Buffett has the well-earned reputation as one of history’s greatest investors. This week he announced his retirement and handed over the reigns of Berkshire-Hathaway to Greg Abel. Mr. Abel, who will start in his new role next January, is Canadian, born and raised in Edmonton. He has been with the company for over 20 years and earned the trust of both Buffett and his late business partner Charlie Munger.
OPEC+ is increasing its oil production by 411,000 barrels per day in June. The announcement put more pressure on an already weak oil price. Benchmark West Texas Intermediate crude traded down to $57.13 at one point. (Brent’s low was $60.23). This follows a similar production increase in May. This will be good news for drivers, not such good news for producers and government coffers in Alberta or Texas.
Do you prefer buttons or a touch screen in your car? We are old school in our house preferring the simplicity and tactile functionality of buttons. Car makers are realizing that we are not alone in our preference and are starting to embrace physical buttons (and knobs, dials…) again. The reasons are not just market preferences. Studies have shown that reaction times while using screens are worse than being drunk or high.
With cars on our minds, I will leave you with this from Tracy Chapman…. Enjoy
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
