North American stocks plunged at the start of April after President Donald Trump announced a sweeping set of global trade tariffs on April 2—measures that far exceeded market expectations. In response, the yield on the benchmark US 10-year Treasury bond surged by half a percentage point in just one week—its largest weekly jump since 2001—highlighting mounting concern in fixed income markets. Gold prices also fell sharply, and market volatility spiked.

However, one week later, equity markets staged a sharp rebound when the president unexpectedly announced a “90-day pause” on the proposed tariffs. While volatility persisted throughout the month due to continued US-China trade tensions, markets stabilized and gradually recovered much of their early-April losses. Bond yields declined as risk appetite improved.

Despite further uncertainty—including President Trump questioning (then reaffirming) Federal Reserve Chair Jerome Powell’s job security, and a mixed message on tariffs (initially reiterated, then eased for electronics including iPhones)—markets closed the month on a more optimistic note, having recouped most or all of their pullback from early in the month.

For the month of April:

• The S&P/TSX Composite Index was nearly unchanged, down just 0.10%
• The S&P 500 Index fell 0.70%
• The Nasdaq rose 0.88%
• The MSCI World Index declined 0.37%
• The MSCI EAFE Index dipped 0.07%
• The FTSE Canada Universe Bond Index fell 0.65%

Key Market Developments

• Tariffs & Trade: On April 2, the US announced reciprocal tariffs on nearly all trading partners. A week later, the White House paused the plan for 90 days, substituting a 10% tariff on most countries, with China facing a steep 145% rate.
• US Inflation: The annual CPI fell to 2.4% in March, down from 2.8% in February.
• Retail Sales: US retail sales rose 1.4% in March, largely driven by autos and building materials—likely reflecting pre-tariff purchases.
• Fed Chair Powell: Publicly warned the tariffs were “significantly larger” than expected and could hinder growth while stoking inflation.
• Consumer Sentiment: April consumer confidence dropped sharply:
  • Conference Board expectations fell to 54.4—levels often seen before recessions.
  • University of Michigan sentiment dropped to 52.2, with inflation expectations hitting 6.5%—the highest since 1981.
• Employment: Private payrolls increased by just 62,000 in April (vs. 115,000 expected). The unemployment rate held steady at 4.2%.
• GDP: Q1 US GDP contracted at an annual rate of 0.3%, down from 2.4% in Q4 2024. The decline was driven by rising imports and lower government spending, partly offset by gains in consumer spending, investment, and exports.

Canadian Economic Highlights

• The Canadian economy shrank by 0.2% in February, following 0.4% growth in January. Early indicators point to moderate growth in March.
• Retail sales fell 0.4% in February but are estimated to have risen 0.7% in March.
• Inflation eased to 2.3% in March, from 2.6% in February.
• Canada lost 33,000 jobs in March, pushing the unemployment rate to 6.7%.
• The Bank of Canada held its key policy rate steady at 2.75%, citing uncertainty from trade tensions.

International Outlook

• Europe: German and UK markets dropped sharply early in the month before partly recovering. The ECB cut rates again to 2.25%, its seventh cut since June 2024, as inflation eased to 2.2%. Eurozone Q1 GDP rose 0.4%, up from 0.2% in Q4 2024.
• China: Growth concerns intensified. The manufacturing PMI fell to 49.0, signaling contraction, as export orders dropped to their lowest level since the pandemic.
• Japan: Inflation accelerated to 3.1% in April, prompting speculation about further rate hikes from the Bank of Japan.
• Commodities: Gold continued its strong run, rising 5.8% in April to close at USD $3,305/oz. Oil prices declined and remain well below their January highs.

Implications for Your Investments

As April closed, Canadian voters elected a new government amid heightened concern about economic sovereignty and trade policy. With Mark Carney now confirmed as Prime Minister, his minority Liberal government faces an immediate challenge: high-stakes trade negotiations with the US. Meanwhile, the IMF downgraded global growth projections, citing escalating trade tensions. Canada’s 2025 growth outlook was revised down from 1.8% to 1.4, while the US is expected to grow closer to its long-term trend of 1.8%.

Despite early-month turmoil, markets ended April showing resilience. Investors will remain focused on how US trade policy evolves, and how macroeconomic indicators—growth, inflation, employment—develop in this uncertain landscape.

The information in this letter is derived from various sources, including CBC, The Wall Street Journal, The Global and Mail, BNN Bloomberg, Financial Times, Bureau of Economic Analysis, Statistics Canada, and The New York Times at various dates. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources and reasonable steps have been taken to ensure their accuracy. Market conditions may change which may impact the information contained in this document. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document.