To my clients:
It was a down week for North American stock markets with the Canadian TSX finishing down 0.4%; the U.S. Dow Jones Index down 0.5%; and the U.S. S&P 500 down 0.2%.
Tariff talk and the first week of a new month:
- Markets got off to a rough start this week as 25% U.S. tariffs on Canadian and Mexican tariffs were set to take effect. However, both countries negotiated 30 day “pauses” on implementation via border control initiatives and fentanyl restrictions. To my lens, its unclear what Trump’s end-game on tariffs might be, but I suspect a client’s observation earlier this week (in an annual review) might be closest to the truth. Paraphrasing the client’s thoughts, he said “It seems to me that Trump is shaking the tree with the threat of tariffs to see what concessions he can jar loose. There may be no specific end goal. However, expect the tree to be shaken regularly and don’t expect the threat of tariffs to disappear even if a seemingly permanent resolution is negotiated in the current instance.”
- As I’ve previously observed, Trump has shown an affinity for gauging his administration’s success by the performance of the stock market. I suspect the significant market declines Monday morning may have contributed to the success of Mexico and Canada negotiating respective “pauses” to the threatened tariffs.
- On the economic front, ISM Manufacturing for just the second time in more than two years printed in positive territory (meaning that manufacturing expanded instead of shrinking). Specifically, at a reading of 50.9, manufacturing beat expectations and posted its best reading since October 2022.
- On the other hand, at a reading of 52.8, ISM Services continued to expand but missed loftier expectations.
- Meanwhile this morning’s Employment Report saw a fewer than expected 143,000 jobs created in December. On the flip side, the unemployment rate dipped down to 4.0% vs expectations for a reading of 4.1%
- Frankly, it was a muddy week from a macro perspective given mixed readings on the economic front and back and forth on the tariff front. Not surprisingly, markets also had a choppy week as a result. As I’ve previously written, heightened volatility is likely to be a feature of markets the next 4 years, though I remain optimistic the trend will remain upward.
That’s it for this week. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
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