To my clients:
It was an up week for North American stock markets with the Canadian TSX finishing up ; the U.S. Dow Jones Index up ; and the U.S. S&P 500 up .
Another week with more of the same. Late last week President Trump threatened Europe with increased tariffs (to 50%) saying negotiations were going “nowhere”. Over the weekend the EU responded promising swift and meaningful talks. With that concession, Trump backed off the 50% threat and postponed implementation to July 9th. For those tracking tariff talks, one will notice that there is a clear pattern with Trump threatening high tariffs on all manner of countries and industries, only to back off and delay implementation. Most notably, this occurred with China. Trump briefly raised tariffs against China up to 145%, only to retreat once negotiations began. Just today we learned that Trump is again dissatisfied with the progress of negotiations – specifically stating that China has totally violated its agreement with us (said “agreement” being Scott Bessent’s gentleman’s understanding with his Chinese counterpart a couple of weeks ago). One might reasonably surmise that higher tariffs could again be threatened. In other words, noise will persist.
But, so far, the “noise” is not translating to meaningful economic slowdown or corporate earnings shortfalls. Regarding corporate earnings, these have been beating expectations by a margin greater than the historical average (though these reflect results as of March 31st, ahead of trump’s may 2 “Liberation Day” announcement). Regarding economics, next week will be pivotal as it is the first week of a new month and, with it, the usual Big 3 indicators I normally cite. The numbers for May will be solidly reflective of ongoing tariff uncertainty - without benefitting from pre-tariff ramps in trade as companies attempted to beat tariff implementation. Combined with possible rising Chinese tensions, I’ll be watching with even more interest than usual.
That’s it for this week. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
Scholte Wealth Management
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