A few topics our newsletter touches on this month:
- Our Thoughts: Riding the Rollercoaster
- Meet Our Summer Intern: Cody McCormack
- By the numbers: May
- Other Things: Disruptors Podcast & Global Insight Monthly
Our Thoughts: Riding the Rollercoaster
Equity markets performed strongly in May, a welcome development for investors following some volatile periods earlier in the year. Stocks gained on moderate US inflation data and an emerging perception that the Trump administration won’t enact its most severe global tariff threats after the US first announced and then rolled back hefty tariffs on China
and the European Union in May. The NASDAQ exchange in particular put on a strong showing on the back of this sentiment as well as resilient tech company earnings. In Canada, equities also posted solid gains as the S&P/TSX Composite Index put in its best monthly performance since November. Fixed income markets signaled greater caution.
The yield on the US 10-year note finished the month higher and the yield on the 30-year bond crested 5% in the second half of May before retreating to 4.9% by month-end. This contrasts with a yield of just below 4% on the 30-year note in mid-September 2024. The significant rise in yields has been hard on bond investors as prices fall as yields rise. Gold fell for the month after touching a record high early in May. Canadian Q1 bank results released in May were a mix of above and below expectations, with higher loan loss provisions for the future a common theme.
Trump’s declaration at the end of the month that he will double tariffs on steel and aluminum imports highlights, again, that uncertainty remains in play. China, the biggest target of US tariffs, has shown few signs of backing away from confrontation although backdoor discussions have been ongoing. In the final week of May, the US Court of International Trade ruled that the Trump administration’s use of the International Emergency Economic Powers Act to impose broadbased tariffs was illegal. The US government immediately appealed, and a federal appeals court quickly issued a temporary stay, allowing the US to continue collecting the tariffs while litigation proceeds, but this legal wrangling over the boundaries of presidential authority could become pivotal.
Another key issue that markets, particularly fixed income, are monitoring is the massive and controversial US budget bill passed by one vote in the US House of Representatives in May and now being taken up by the Senate. The bill as currently written will increase the US debt and deficit substantially and is causing some unease in bond markets. Also of
interest, Canadian equities continue to outshine their US counterparts year-to-date and on a rolling one-year basis, but the evolution of trade issues with the US will remain critically important for our economy through 2025 and beyond.
If you have questions or wish to discuss your portfolio, please do not hesitate to reach out by e-mail or call 613-721-8928 to book a review with Mark, Peter, or Sarah.
Meet our Summer Intern: Cody McCormack is a master’s student in economics at Carleton University, specializing in finance. After first studying cognitive neuroscience, he developed a deep interest in economic history and political economy. Cody worked previously at a non-profit where he ran econometric regressions on minimum wage laws, presenting his findings at international conferences. He looks forward to applying his skills as an economist in the years ahead. With summer here he enjoys jogging outdoors with an audiobook on play
By the numbers (May): The TSX was up 5.6% while the S&P 500 was nearby at 5.8% in Canadian dollar terms. The U.S. dollar S&P 500 was up 6.3%. The Europe, Australia & Far East index (EAFE) rose 3.5%, while the NASDAQ rebounded a whopping 9.1%. At the same time, the Canadian bond market was flat.
Interesting Listening/Reading:
- Disruptors - A dynamic 30 min RBC podcast co-hosted by John Stackhouse and Sonia Sennik about reimagining Canada’s economy in a time of unprecedented change.
- To check out our Global Insight Monthly for May find the link here.
Regards,
Mark, Peter, Sarah, Corinne & Cody