Global Asset Allocation Team Market Update – April 2025

Global equity markets tumbled lower in March. The S&P 500 assumed the brunt of the weakness stemming from President Trump’s actions. The high-flying megacap stocks that dominated in 2024 wobbled, with the “Magnificent-7” sliding into a technical correction amid concerns about lofty valuations. The S&P/TSX also edged lower but outperformed the S&P 500 thanks to solid returns in the heavyweight resources space. Elsewhere, the MSCI EAFE inched lower but outperformed its developed market peers as Germany’s fiscal spending plans boosted the outlook for the economy and corporate earnings. The MSCI gauge of emerging market stocks bucked the global trend and eked out a modest gain as China’s pledge to boost domestic demand and optimism around the country’s artificial‑intelligence outweighed trade war concerns.

Fixed income markets were little changed, with some hints of stagflation leading to the continued breakdown of bonds’ traditional role as a haven in times of turmoil. While long-term bond yields inched higher, short-term bond yields declined as investors wagered that the trade war will spur more central bank rate cuts – a sign that markets see growth, not inflation, as the dominant risk.

The US dollar extended its decline as a shift away from the theme of US exceptionalism eroded the greenback’s safe haven status. Indeed, escalating tariff threats and a bid to roll back decades of globalization shook confidence in the currency. By contrast, the euro strengthened in anticipation of aggressive government spending out of Germany. And despite lingering tariff threats, the Canadian dollar advanced against a broadly weaker US dollar and alongside the latest rally in oil prices.

Finally, oil rose as investors contemplated the potential for supply disruptions stemming from sanctions and tariffs on major producers including Iran and Venezuela. Gold topped a fresh record high as unnerved investors flocked to the safety of the precious metal given looming risks on the trade front that shattered risk appetite.

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