Uncertainty around U.S. tariffs remains, but the worst-case scenario has largely been ruled out as progress toward trade deals is being made. In our base case scenario, economic growth should slow, but not stop, and any rise in inflation should prove temporary. Stocks can perform well against this backdrop if policy, earnings and investor sentiment cooperate, and bonds offer decent return potential with only moderate valuation risk.
Stocks had suffered steep declines followed by an impressive recovery as the narrative on U.S. trade policy shifted wildly. The tariffs sparked an intense sell-off, pushing many of the technical and sentiment indicators that we track to extremes and a shift in leadership away from U.S. stocks toward international markets took place. As tariff delays were announced, talk of trade deals ensued, allowing most markets to recover losses and some, particularly international markets, rose to records. At this point, our models suggest that global equities are fairly priced and offer attractive return potential, especially non-U.S. markets.
2020’s “pandemic” and 2023’s “AI”, a word of the year often helps capture its zeitgeist succinctly. 2025 is already making a strong case for “uncertainty”. Last year’s political upheaval has helped make this year one of the most seismic in decades, characterized by volatility, upheaval, and confusion. As the post-World War II global, political and economic order is increasingly challenged, and even upended, it has led in many cases to deeply unsettling insecurity and apprehension across governments, businesses, and citizens.
Uncertainty has no doubt been manifested in markets and the economy, thanks to an unprecedented trade war with its expected retaliation. Add in multiplying geopolitical conflagrations, and the need for calm and cool heads becomes increasingly apparent. Vexing times require the clear-minded and disciplined process that is the core of RBC PH&N Investment Counsel’s approach. This approach helps ensure we remain focused on the long-term needs of our clients to achieve two key outcomes: growing our clients’ wealth, and helping to ensure that they achieve the goals that matter to them. Of that, we are always and absolutely certain.
I wish you and your family a happy and safe summer ahead.
Sincerely,
Vijay Parmar
President, RBC PH&N Investment Counsel
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