Market Quote: Bank of Canada, North American Equities
Author: The editor's desk
March 13, 2025
A weekly analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
The R Word
North America’s equity markets remain highly volatile because of the U.S. administration’s contentious new tariff policy that continues to create growing uncertainty about the strength of the U.S. economy as and the future of trade relations with some trade some of its closest allies including Canada, and adversaries like China. Many stocks have also traded at higher-than average valuations over the past couple of years, so a reset of some kind may have been inevitable regardless of circumstances.
The S&P 500 Index is down almost 10% in less than a month, while the S&P/TSX Composite Index has fallen 6% since hitting a new all-time high at the end of January. Pullbacks of this nature are somewhat common occurrences in global equity markets and historically result in new potential buying opportunities based on more favourable valuations.
Yet, it’s always difficult to time such recoveries and the current bout of heightened volatility is widely expected to last for a bit longer as the escalating tariff war threatens to undermine economic growth and while not my base case scenario, potentially fuel a recession.
A Cut with a But
The Bank of Canada (BoC) cut rates by 25 basis points as expected on Wednesday, but tempered that move with its concern about rising short-term inflation expectations.
The country’s central bank seems aware of the limitations of monetary policy in a trade war and expects potential fiscal policies to better address trade tensions and support growth. As such, we believe the BoC is reluctant to cut rates too quickly or too deeply, although they are willing to be supportive if necessary.
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