To my clients:
I will be away from the office next Wednesday through Friday (at volleyball nationals in Edmonton for my daughter!) and will not be writing a weekly update. I’ll be connected while away and will be periodically checking on news and market developments, but I’ll likely not be responding to emails. Please contact Brenda if there are any pressing needs.
It was a mixed week for North American stock markets with the Canadian TSX finishing up 1.3%; the U.S. Dow Jones Index down 0.2%; and the U.S. S&P 500 down 0.5%.
Owing to time constraints, it will be a short, point-form update this week:
- The Federal Reserve, as expected, held rates steady this week. Chairman Jerome Powell acknowledged the heightened difficulty in presently managing the Fed’s dual mandate of promoting maximum employment while maintaining inflation at the Fed’s 2% target. President Trump’s tariff agenda might fuel inflation (which typically requires HIGHER interest rates to tame), whereas the same tariff policy might engender economic slowdown leading to increasing unemployment (which typically requires LOWER rates to combat). In truth this dual mandate is always in tension, but historically it’s typically (not always) been easier to determine an acceptable balance. The current approach to tariff policy makes striking a balance much more difficult.
- On tariff policy, in spite of the chosen approach of the Trump administartion, might it be working? The first bilateral trade deal was announced yesterday between the United Kingdom and the U.S. Further, according to Trump and several other senior administration officials, there are many more trade deals approaching completion. Further still, the U.S. and China have agreed to weekend negotiations in Switzerland with Treasury Secretary Scott Bessent personally attending and negotiating on the U.S. behalf. These are all positives.
- Tempering some of this positivity, it’s important to note that the U.K trade deal was low hanging fruit. The U.S. runs a trade surplus with the U.K., and it does little to resolve Trump’s stated objective of reducing the U.S. global trade deficit (i.e. the present condition where th- e U.S. imports far more than it exports). Whether the U.K. deal sets a template for other countries to follow is debatable at best and, in my opinion, better characterized as unlikely. But we shall see what the next week or two bring.
And yet another reminder: tariff policy and the U.S.’s attempt to restructure the world trading order is by far the market disruptive of President Trump’s intended policies. Corporate tax cuts and deregulation will be forthcoming in time, and these will be far more market friendly.
That’s it for this week. Next update in two weeks. 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
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
Toll Free: 1.844.665.9900 │Email: nick.scholte@rbc.com
Visit Our Website: www.nickscholte.ca