Global Asset Allocation Team Market Update – May 2025

Global equity markets gyrated in what was a volatile month but managed to finish in positive terrain. The MSCI All Country World rose 0.8% in April. However, regional performance was mixed. The S&P 500 (-0.8%) extended its streak of underperformance versus its global peers, while the S&P/ TSX (-0.3%) retreated on the back of a sharp decline in the heavyweight energy (-6.3%) sector. Elsewhere, the both the MSCI EAFE (+4.2%) and the MSCI gauge of emerging market stocks (+1.0%) bucked the global trend and advanced as investors continued to flee US assets.

Fixed income markets also saw some notable volatility in April, bringing into question the traditional role of bonds as a haven in a tumultuous market environment. Initially, long-term treasury yields spiked amid speculation that President Trump’s tariffs will sap international demand for treasuries. However, yields reverted lower towards month-end as traders ratcheted-up their wagers for Federal Reserve rate cuts following some worrisome signs of a deteriorating economic backdrop. By contrast, Canadian government bond yields inched higher after the Bank of Canada hit pause on rate cuts for the first time since last June and as traders braced for high and rising deficits under the new (Liberal) government. For the month, the Bloomberg US Aggregate Bond Index rose 0.4% – while the FTSE Canada Bond Universe slipped -0.6%.

The US dollar (-4.6%) extended its rout as intensifying trade tensions caused investors to reduce their US exposure. The greenback was lower versus all its Group-of-10 peers for a second straight month.

Finally, oil (-18.6%) posted its biggest monthly decline since 2021 as investors braced for a shock to global demand stemming from the trade war, while signs that OPEC and its allies may be entering a prolonged period of higher production added to fears about a supply glut. Gold (+6.3%) hit a fresh high but slipped towards month-end on signs of potential progress in trade negotiations that stifled demand for safe haven assets.

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