Investment update

Weekly insight into the marketplace.

February 10 to 14, 2025

Stock markets gained ground in the face of headwinds

The major North American stock markets started the week in rally mode. Widespread gains came on Monday even though U.S. President Donald Trump had announced 25% tariffs on all steel and aluminum imports (including those from Canada) would come into effect on March 12. Canada’s resource-heavy TSX rose 0.85% on the back of energy, base metal and technology stocks. On Wall Street, the Dow closed 0.38% higher, the S&P 500 gained 0.67%, and the tech-heavy Nasdaq jumped 0.98% after shares of AI chipmaker Nvidia surged 3%. Tuesday brought mixed results. The TSX gave back 0.11%, as weakening base metal stocks offset gains from the energy sector. The S&P 500 stayed flat while the Dow turned in a modest 0.28% gain. Meanwhile, the Nasdaq lost 0.36% after Federal Reserve (the Fed) Chair Jerome Powell, testifying to the U.S. Senate Banking Committee, suggested policy-makers were in no hurry to ease monetary policy. On Wednesday, the TSX fell another 0.27%, as energy stocks weighed on performance. U.S. stock markets turned in mixed results again, while U.S. Treasury yields rose, after January inflation data added to concerns that high consumer prices could keep interest rates elevated for longer than expected. Thursday saw investors respond positively to President Trump’s announcement about reciprocal tariffs on trading partners, which was more tempered than anticipated. Technology, base metal and telecom stocks helped the TSX close 0.53% higher. The Dow gained 0.77%, while the S&P 500 and Nasdaq gained 1.04% and 1.50%, respectively. On Friday, the major stock markets posted losses across the board but remained in positive territory on a weekly basis.

U.S. inflation data took centre stage

On Wednesday, the U.S. Department of Labor reported that the consumer price index (CPI) increased 3% in January from a year ago, up from 2.9% the previous month. CPI has remained above the Fed’s 2% target, after falling steadily for about 18 months and reaching a three-and-a-half-year low of 2.4% in September. Core consumer prices, which exclude volatile food and energy costs, rose 3.3% in January compared with a year ago, up from 3.2% in December. Inflation also increased monthly, with prices up 0.5% in January, the largest month-to-month increase since August 2023. Core prices climbed 0.4% last month, the most since March 2024. Core measures are preferred by economists in determining the path of inflation. The news weighed heavily on equity market performance. The Dow dropped 400 points and bond yields rose sharply on Wednesday, as investors are more convinced that interest rates will remain higher for longer.

Tariffs and trade continued to cloud the outlook

The prospect of a global trade war continued to loom large over financial markets. On Monday, President Trump signed an executive order imposing 25% tariffs on steel and aluminum imports, effective March 12. This news was just the latest in a string of aggressive U.S. trade policy announcements, including planned tariffs on goods from China, Canada and Mexico (which were delayed for 30 days on February 4). During media interviews on Tuesday, Prime Minister Justin Trudeau referred to U.S. tariffs on steel and aluminum imports as “entirely unjustified” and “unacceptable.” Trudeau also noted that the federal government will be working with the U.S. administration in the coming days and weeks to highlight the negative impact of tariffs, noting: “If it comes to that, our response, of course, will be firm and clear. We will stand up for Canadian workers. We will stand up for Canadian industries.” On Thursday, Trump announced the U.S. would examine reciprocal tariffs on countries with a trade surplus against the U.S. – which includes Canada. This news was greeted with some relief by investors, who had feared a more aggressive approach aligned with Trump’s recent social media posts.