June 20, 2025

The week in the markets

The Fed’s inflation warning caught markets off guard…

The U.S. Federal Reserve held rates steady but warned of potential tariff-led inflation. Market reaction was muted, rate cut expectations were unchanged and the urgent need for cuts was downplayed. Geopolitical fears flared, as the U.S. reportedly prepared for a potential strike on Iran, pressuring risk assets.

• The U.S. Federal Reserve held rates steady but warned of potential tariff-led inflation.
• Market reaction was muted, rate cut expectations were unchanged and the urgent need for cuts was downplayed.
• Geopolitical fears flared, as the U.S. reportedly prepared for a potential strike on Iran, pressuring risk assets.

The week in the markets - Jun 20 | IG Wealth Management

The U.S. Federal Reserve (the Fed) left rates unchanged at 4.25-4.5% for the fourth consecutive meeting, with Fed policymakers still expecting two rate cuts later in 2025. However, the market’s attention quickly shifted to Fed Chair Powell’s press conference. His key comment, “We expect a meaningful amount of inflation in coming months,” caught traders off guard, especially as he acknowledged signs that companies plan to pass on higher costs from tariffs. Powell emphasized uncertainty about the size, scope and duration of tariff impacts. The result was a volatile trading session that saw stocks swing on Powell’s tone and a barrage of President Trump headlines about Iran. Equities finished flat, yields held steady and traders were left with more questions than answers.

Beyond the press conference’s usual drama, the Fed’s updated projections hinted at a more stagflationary backdrop: GDP forecasts for 2025 were revised down to 1.4% from 1.7%, while inflation was revised up to 3.1% from 2.8%. Despite that, the median forecast for 2025 still calls for two rate cuts, with fewer reductions expected in 2026 and 2027. Fed Chair Powell acknowledged labour markets remain solid, but also noted a “very, very slow cooling.” The Fed appears in no rush, preferring to “wait and learn more” before adjusting policy, especially with tariff effects still uncertain, and fiscal developments evolving.

Global markets turned away from risk after Trump was reported as saying that he will decide within the next two weeks whether the U.S. will be directly involved in striking Iran. Oil surged on supply concerns. Any U.S. action could trigger a knee-jerk market reaction, with safe-haven demand for Treasuries and gold likely to rise. However, we suggest you listen to this week's podcast to know more about investing in times of geopolitical turbulence. Investors are now weighing the inflationary risk of higher oil prices against a Fed still trying to assess the real economic toll of tariffs. As geopolitical tensions mount, risk appetite is fading.

While U.S. markets were closed on Thursday of this week, they weren’t quiet on Friday, which saw the largest June options expiry on record (options are contracts to buy or sell an asset at an agreed price, at a later date). Plus, with Middle East risk likely to remain front and centre for some time, the Fed may be standing still, but the world isn’t.

More information via the Living Market podcast, episode 158 – Geopolitics versus your portfolio: what’s the real impact?

*The data contained in the charts above is provided by Bloomberg as of 4:00 PM ET. Please note that the final closing market values may vary due to data delays and market settlement.

This commentary is published by IG Wealth Management and is provided as a general source of information. It is not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein. Investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm) and Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund. Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus before investing. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated.

This document may include forward-looking statements based on certain assumptions and reflect current expectations. Forward-looking statements are not guarantees of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Some of these risks are changes to or volatility in the economy, politics, securities markets, interest rates, currency exchange rates, business competition, capital markets, technology, laws, or when catastrophic events occur. Do not place undue reliance on forward-looking information. In addition, any statement about companies is not an endorsement or recommendation to buy or sell any security.

Trademarks, including IG Wealth Management, are owned by IGM Financial Inc. and licensed to its subsidiary corporations.

© Copyright 2025 Investors Group Inc. Reproduction or distribution of this commentary in any manner without the express written consent of IG Wealth Management is strictly prohibited. Please read Conditions of Use for more information concerning authorized uses of this document.

May 30, 2025

No Political Shocks, No Market Shocks - But the potential is there

Now that the election dust has settled and the Liberal minority is confirmed, it's time to step back and think about what it really means for the Canadian market and currency.

For the most sensitive aspect of the economy right now, trade policy, the situation remains fluid, but there's a case to be made for more stability ahead. The Prime Minister's international reputation and experience should help smooth relations with the U.S. — or at least prevent unnecessary friction — which adds another layer of certainty for businesses and investors. Simply put: one less thing to worry about.

Energy and resources policy is the area to watch when it comes to politics and markets. In theory, any shift should be positive: it's already extremely difficult to add new restrictions, and a more pragmatic tone from the Liberals could be a tailwind for Canadian producers. If energy policy turns out to be even mildly supportive, the sector might regain some momentum, especially if global demand stays healthy.

Looking at the market more broadly, though: Canadian stocks are more sensitive to global trade flows and commodity prices than to domestic politics. Election results rarely move our markets dramatically, and this one is no exception. As for the currency, first and foremost: it's still all about the rate differential with the United States. The narrower the spread between Canadian and U.S. rates, the stronger the loonie tends to get. With a Liberal minority, there's now a possibility of supportive fiscal policies, including potential tax cuts, which could bolster the Canadian economy, giving an extra boost to the Canadian dollar. (Which, by the way, isn't necessarily great news for exporters or Canadian equity returns.)

In summary, here's the 3 things we are watching:

1. Energy/Resources Policy – An expanded resources policy should provide a tailwind for the sector and support broader market performance.
2. Tax Policy – Proposed tax cuts are likely to stimulate the economy. A stronger economic backdrop could, in turn, slow the pace of Bank of Canada rate cuts, limiting downside pressure on the Canadian dollar. If the fiscal measures prove genuinely supportive over the longer term, the loonie could trend higher over the next two to five years.
3. Tariff Policy – With deep experience in crisis management and strong global connections, Carney’s leadership is well positioned to deliver constructive outcomes on trade. A positive resolution on tariffs would be a clear boost for both the Canadian economy and the loonie.

Overall, we don’t see the election results moving markets in any meaningful way over the near-term. With the election behind us, one element of uncertainty has been removed, and that’s a good thing. The bigger picture is towards the future and what policies the new government introduces and what it may mean for the Canadian economy and markets.

Tune into the IG Living Market Podcast, The week in the markets, and follow the team on LinkedIn.

Philip Petursson, Chief Investment Strategist

Pierre-Benoît Gauthier, Vice-President, Investment Strategy

Ashish Utarid, Assistant Vice-President, Investment Strategy

This commentary is published by IG Wealth Management. It represents the views of our Portfolio Managers and is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein. Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus before investing. Mutual funds are not guaranteed, values change frequently, and past performance may not be repeated.

This commentary may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events.

Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of April 29, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. Mutual Funds and investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm). Additional investment products and brokerage services are offered through Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund. Trademarks including IG Wealth Management are owned by IGM Financial Inc. and licensed to subsidiary corporations.

April 9, 2025

Finding opportunity amid trade war uncertainty

Investor sentiment turned cautious in the first quarter of 2025, as markets faced heightened uncertainty stemming from significant shifts in U.S. trade policy. These changes, driven by the return of President Trump, led to increased volatility in North American markets, testing investor resilience. While the S&P/TSX Composite Index posted modest gains, the S&P 500 underperformed. In contrast, developed European markets significantly outperformed, benefiting from a rotation away from U.S. equities toward Europe. This shift reflected investors' perception of stronger global growth potential and Europe's relatively attractive valuations compared to U.S. equities.

Read full report

The return of President Trump and his abrupt shift in U.S. trade policy toward longstanding trade partners — most notably Canada, Mexico and China — had a considerable impact on equity and bond performance. The unpredictable nature of these tariffs, particularly those targeting Canada, created volatility in equity markets as investors grappled with “on-again, off-again” announcements and hastily introduced sector-specific carve-outs. This uncertainty, coupled with the risk of escalating reciprocal trade tariffs, weighed heavily on the S&P 500, potentially impacting earnings growth.

Despite the challenges posed by trade disruptions, the market still expects year-over-year earnings growth to remain in the low- to mid-teens. The strength in manufacturing provides a glimmer of hope. Although the U.S. administration's initial deregulation efforts offered some early support to the market, this was quickly overshadowed by rising trade tensions.

“Diversification across sectors, asset classes and geographical regions, and remaining focused on the long term will be key to weathering short-term turbulence.” Philip Petursson

Looking ahead, we remain optimistic, despite recent market volatility and lingering uncertainties. While U.S. equities have faced challenges, including a pullback from February highs and sensitivity to tariff concerns, other regions, such as Canada, Europe and emerging markets, offer compelling opportunities. These regions have shown resilience, supported by stronger fundamentals and more attractive valuations compared to U.S. markets.

Ongoing volatility, driven by evolving and unpredictable U.S. trade policies, has created uncertainty in global markets. Diversification across sectors, asset classes and geographical regions, and remaining focused on the long term will be key to weathering short-term turbulence.

Find out more in our 2025 First Quarter Market Review and stay up to date on the latest market trends with our weekly market commentary.

  READ  FULL  REPORT  

This commentary is published by IG Wealth Management. It represents the views of our Portfolio Managers, and is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein. Investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm) and Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund.

This commentary may contain forward-looking information which reflects our or third party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information.

Trademarks, including IG Wealth Management and IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to subsidiary corporations.

© Copyright 2025 Investors Group Inc. Reproduction or distribution of this commentary in any manner without the express written consent of IG Wealth Management is strictly prohibited. Please read Conditions of Use for more information concerning authorized uses of this commentary.

March 5, 2025

Time to be a hunter, not a sheep

Crazy, but that's how it goes
Millions of people living as foes
Maybe it's not too late
To learn how to love
And forget how to hate

~Crazy Train by Ozzy Osbourne

A client-facing email template will be available on AdvantagePlus tomorrow for you to share with clients. The email below is also shareable but contains more technical details.

After weeks of posturing, threats and delays, President Trump announced the implementation of a 25% tariff on all products into the United States from Canada excluding energy products which will see a tariff of 10%. Mexico faces a similar 25% tariff while China will see an additional 10% added to its already existing 10% tariff. Let's make no mistake about it, the reasoning offered by Commerce Secretary Howard Lutnik that this is a war on drugs is a farce. This is the outcome when eternally stubborn combines with unmitigated lunacy. Regardless of the reasoning, businesses, consumers and investors are left holding the bag and paying the price for the Trump ideology.

The immediate reaction has been negative as major equity markets around the world fell in response to the announcement. The EuroStoxx 600 fell by 2.14% on the day. The S&P 500 Index had fallen by as much as 2% intraday before closing down -1.22%. In Canada, the S&P/TSX Composite Index fell by -1.72%.

Let's put aside the politics for now and bring out the strategy playbook. We see three key outcomes to the current environment.

1. Economic growth will take a (temporary) hit.

In Canada and the United States, the tariffs are likely to trim economic growth for as long as they remain in place. The tariffs are a tax, whether borne by the importer or the ultimate consumer, someone pays. This will drive up the cost of just about everything imported by the United States from China, Canada or Mexico.

Exports to the United States represent 76% of total Canadian exports as of the 12-months ending 2024. These exports account for almost 20% of our GDP. In its recent Monetary Policy Report the BoC forecast GDP growth of 1.8% for 2025 excluding any negative effect from tariffs. In the Bank's analysis, a 25% tariff on all exports to the United States would have an approximate 2.5% detraction in economic activity for Canada in 2025. Taking the two assumptions, should the tariffs remain in place for the entirety of the year the Canadian economy would likely fall into recession.

The increased costs to consumers and reciprocal tariffs by Canada and Mexico are also likely to trim US GDP. According to Yale University researchers, the announced tariffs are projected to reduce real GDP in the United States by 0.6% in 2025 (The Fiscal, Economic, and Distributional Effects of 20% Tariffs on China and 25% Tariffs on Canada and Mexico I The Budget Lab at Yale). The potential hit to consumer sentiment could push growth further on weaker consumption.

A trade war would have implications for businesses and consumers on both sides of the border. For Americans, the U.S. tariffs would be most apparent in their impact on prices. Given how widespread they are, tariffs would undoubtedly raise the cost of living in the United States. Any business or consumer who buys a product made in, or that has inputs from, Canada, China or Mexico would face higher prices. This would be true for everything from houses, to cars, to groceries, to gasoline.

Keep in mind however, that the economic weakness and potential for a modest recession in either country is manufactured as opposed to a by-product of something else broken with the economy. And therefore, any weakness is as temporary as the tariffs themselves. To that end, given only a fool would want to cause long-term distress to his economy its reasonable to expect a deal to return to the status quo will be reached before long.

2. Central Banks may, and may not, provide a reprieve (depends on which central bank).

The Bank of Canada has a policy announcement next week. Bond investors are now pricing in a more than 90% probability that the BoC will cut by another 25 bps taking the overnight rate to 2.75%. In Canada, the impact may be felt more in economic growth rather than inflation. Governor Macklem has stated that monetary policy cannot offset tariffs, but can help the economy adjust. We believe that the BoC may take the policy rate below our earlier assumed terminal rate of 2.5% to between 2 and 2.25% depending on how long the tariffs remain in place. This is likely to be more gradual. The longer the tariffs remain, the deeper the cut.

In contrast, the U.S. Federal Open Market Committee may not be as quick to provide monetary support in the face of tariffs. Recent comments by Fed officials lean towards remaining inflation concerns. Despite current market pricing for 3 cuts of 25 bps by the Fed for 2025 (June, September, and December) the risk to inflation from the tariffs may outweigh the potential for labor market weakness. We expect 1-2 Fed cuts through the year, and more likely later than sooner. A last point here is that the FOMC may not see it as their job to fix what the White House broke. If labor market and economic weakness is the consequence of Trump policy, the Fed may see it as up to the government to adjust the policy that precipitated the weakness.

If we are correct in the difference in policy approach, then we would also expect a reaction in the currency markets. The Canadian dollar dipped below US$0.69 during the day. Fair value based on the above policy expectations would suggest a level for the Canadian dollar of US$0.67. The risks to the Canadian dollar lean to the downside. This is in part a good news/bad news story. The bad news is that U.S. imported goods will become even more expensive. The good news is that a weaker loonie will offset some of the tariff impact; in particular on the energy front with the lower 10% tariffs being nearly completely offset by the drop in the Canadian dollar over the last 6 months.

3. Out of chaos comes opportunity.

First of all, it is boring, it is not special or original, but diversification is key. European markets are still up massively year-to-date, and Chinese markets have shown the same resilience. Gold remains volatile but tends to react positively to tariff news. As expected, government bonds are performing extremely well, offering a safe haven.

Of course, diversification isn't a magic bullet-it can soften the blow, but it doesn't eliminate it. That said, while the situation is frustrating, it's also temporary. The only real way through this is patience. Market shocks like these tend to create opportunities. Case in point: the Magnificent Seven stocks have already shed US$2.4 trillion in market capitalization from their highs. Great companies will stumble, and when they do, they'll present attractive entry points.

Putting it into perspective

Despite all the political chaos, not limited to just the tariff announcement, the S&P 500 Index is down a mere 5% from its all-time high of February 19th. The volatility feels worse than it is because of what I can only call the headline effect. If we keep being told how awful things are, we start to believe it and our perception of things become amplified. A 5% drop would fall into the category of normal market activity. That's not to trivialize things. Nor to say the volatility can't continue. It can. Volatility is a function of the markets - equity, commodity or bond.

We have just come through a stellar earnings season. S&P 500 companies reported 13.2% earnings growth year-on­year. Unemployment in the United States and Canada sits at 4% and 6.6% respectively - still low from an historical perspective. The earnings outlook for both the S&P 500 and S&P/TSX Composite Indices are in the mid-teens. Should tariffs extend through 2025 we would trim US earnings by half while trimming TSX earnings by only a couple of percentage points. The general view is that US equities and US multinational companies will bear the worst of the tariff tantrum. The majority of Canadian exports excluding energy, are largely produced by international subsidiaries. Therefore the impact to the TSX should be less than that of the S&P 500. Regardless, we see this as more a disruptive event rather than a destructive event.

The tariffs may continue for the time being, but they won't last. Equity volatility may continue for the time being, but it won't last. In the meantime, a diversified portfolio should weather the tariff storm well until opportunities start to present themselves.

This is a time to be a hunter, not a sheep. Hunters know when to wait, when to act, and when to take the long game seriously.