Monthly Market Data & Commentary

In Canadian news, real GDP expanded at an annualized rate of 2.2% in the first quarter of 2025, exceeding expectations of both economists and the Bank of Canada by 0.5%. This increase in real GDP marks the largest growth rate since the COVID-19 pandemic ended. However, despite the GDP growth many economists believe that this increase is likely temporary due to a surge in demand for Canadian exports caused by the US tariff policy. As both the labor market and business investment metrics have continued to weaken in Canada over the last few months despite the Bank of Canada lowering interest rates by 1.75% over the previous year. Unemployment has risen to 6.9%, reaching its highest point in four years, increasing 1.2% since the start of 2024. These weakening fundamentals have caused some economists to become critical of the Bank of Canada’s decision to hold the interest rate steady at 2.75% for a third straight meeting.

In other Canadian news, the TSX rebounded strongly, recording a positive return of 5.37% in May, regaining the losses in April and bringing the year-to-date return to 5.85%. The Canadian bond market remained steady in May, returning 0.1%, as volatility within the financial markets began to normalize after the tariff shocks in early April.

In the United States, the tariffs are once again in the headlines as Donald Trump announced a doubling of steel and aluminum tariffs, which will take effect on June 4th. These tariffs will raise the import taxes on aluminum and steel from 25% to 50%. The rationale for the increase was to protect US steel and aluminum producers, as the president deemed this sector critical for the country's national security. The increase in tariffs was met with resistance from major US trading partners, with countries like Canada, Mexico, and China announcing that they are considering retaliatory tariffs in response to the hikes.

On a positive note, the US economy seems to be rebounding well as fears of a full-scale trade war between China and the United States have subsided. The S&P 500 increased 6.15% in May, taking the return for the year into positive territory. In addition, consumer confidence increased sharply, rising from 86 to 98, a gain of twelve points, which is the largest increase in four years. Furthermore, economists at JP Morgan reduced their expected chance of a recession this year from 60% down to 40%. These economists cited an improving outlook for the US economy and stabilizing US-China trade relations as the reason behind the change.

In international news, the European stock markets have rebounded well in May, recovering the majority of the losses that they experienced in April. After a challenging 2023 and 2024, Europe experienced strong returns in 2025 due to the German and Spanish economies exceeding their GDP growth targets. As a result, the German DAX and Spanish IBEX stock markets increased by 22.17% and 21.64%, respectively. 

In China, the country continues to adapt to the changing tariff landscape by rerouting exports intended for the US to Europe. Chinese exports to the US declined by 21% in April which was partially offset by an increase in European exports of 8.2%. In the future, many experts expect Chinese companies to focus on further developing trade relations with Europe to insulate themselves from the effects of US tariffs.