Below is a summary of some of the relevant news items from the Capital Markets and the Economy from the past week extracted from RBC Global Insights and FactSet Research.

You can catch up on the past four weeks’ Weekly Update in the link to my Blog.

Read my latest Smart Investor newsletter on my website. The Q2 2025 edition covers Market Review for Q1 2025, the impact of tariffs on markets, and how to position your portfolio during a time of disruption. Shiuman’s Corner is about the art of retail in Japan.

Markets

Market scorecard as of close on Friday May 23, 2025.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	25,880	-0.4%	4.7%
U.S.	S&P 500	5,803	-2.6%	-1.3%
U.S.	NASDAQ	18,737	-2.5%	-3.0%
Europe/Asia	MSCI EAFE	2,580	1.2%	14%

Source: FactSet

• The market opened the week processing last Friday's downgrade of US government debt by Moody's, citing the failure of successive administrations to address growing fiscal deficits and higher interest costs. However, investors seemed to largely shake off the event--Moody's was the last of the major rating agencies to downgrade, and the US had been on watch since November 2023.
• Major US equity indices were lower last week, trimming the prior week's notable gains. The S&P slipped back into a YTD loss though is still up more than 16% from its April low (before President Trump announced the 90-day tariff pause). Treasuries were mostly weaker, particularly at the long end of the curve; the 30Y yield was up 14bp for the week and ended just above 5% (though off the 5.15% intraday level it hit Thursday).

Economy

Canada

• Canada's inflation rate slowed to 1.7% in April. The end of the consumer carbon tax drove inflation down year-on-year from 2.3% in March, as prices at the pump dipped 18.1%. Excluding energy, core inflation stood at 2.9%—up from 2.5% in March, Statistics Canada said. RBC Economics' expects a softening economy to push the Bank of Canada to cut the overnight rate down to 2.25% in the summer (from 2.75%).
• Canadian home prices fell for a fifth consecutive month in April. The seasonally adjusted MLS Home Price Index dropped 1.2% m/m, with house prices down 3.6% y/y. The decline was spread across both single-family homes and apartments. With cold weather a smaller factor in April, the slowdown in home prices was likely driven by economic uncertainty that stemmed from the trade war and weighed on demand.

U.S.

• Despite early signs of trade progress, recession risk for the United States remains elevated. According to Polymarket, the world’s largest prediction market, the odds of a U.S. recession in 2025 peaked at 65% in early May but have since moved notably lower after President Trump announced a trade deal with the United Kingdom and paused reciprocal tariffs on China for 90 days.
• For now, the takeaway is that while recession odds have moved lower, the economy remains in a precarious position, and it is too early to assume the risks have meaningfully passed.

Further Afield

• The Euro region’s near-term economic growth outlook is uncertain, as illustrated by private sector activity in the euro area unexpectedly shrinking in May (Composite Purchasing Managers’ Index: 49.5; economists’ consensus: 50.4). However, if we look out to 2026 and 2027, German fiscal stimulus, higher EU defence spending, and a recovery in consumption aided by lower interest rates all support the prospect for a recovery in euro area growth.
• After speaking with Ursula von der Leyen, the President of the European Commission, the U.S. President announced on Sunday that he would delay imposing 50% tariffs on imports from the EU’s 27 nations until July 9.

Notes About Companies in Model Portfolio

• Apple (AAPL) The US administration and the President indicated Thursday morning the likelihood of a tariff (at least 25%) on iPhones sold in the US from an international manufacturing footprint, irrespective of country of origin. Tariffs would have to be on smartphones overall, rather than iPhones alone, putting Apple in a better position on a relative basis. The now-discussed 25% tariff on US iPhones implies the need for global pricing of about 5% or ~$50 on an individual iPhone, which is within the realm of typical price increases the company has taken in the past. (JP Morgan Equity Research).
• Toll Brothers, Inc. (NYSE:TOL) builder of luxury homes, announced results for its second quarter ended April 30, 2025. Net income and earnings per share were $352.4 million and $3.50 per diluted share, compared to net income of $481.6 million and $4.55 per diluted share in FY 2024’s second quarter.

 

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Regards,

Shiuman

 

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