The uncertainty caused volatility to spike and the U.S. stock indexes to fall sharply as investors tried to position themselves for the imminent risks. In the background, central banks remained on their guard, as they weighed signs of a slowdown against inflationary pressures potentially exacerbated by U.S. protectionist policies.
AS AT MARCH 31, 2025
| Closing 31-03-25 |
Variation 28-02-25 |
Variation 31-12-24 |
|
|---|---|---|---|
| Key interest rate in Canada (%) | |||
| Key interest rate in Canada (%) | 2.75 | -0.25 ▼ | -0.50 ▼ |
| Oil (WTI) | |||
| Oil (WTI) | $71.48 | 2.4% ▲ | -0.3% ▼ |
| Gold | |||
| Gold | $3,123.57 | 9.3% ▲ | 19.0% ▲ |
| EUR/CAD | |||
| EUR/CAD | 1.55 | 3.5% ▲ | 4.0% ▲ |
| JPY/CAD | |||
| JPY/CAD | 0.01 | 0.0 | 4.5% ▲ |
| USD/CAD | |||
| USD/CAD | 1.44 | -0.4% ▼ | -0.1% ▼ |
Sources: Bank of Canada, Bloomberg Finance L.P.
CANADIAN MARKET
-1.5% (S&P/TSX Composite 31-03-2025)In Canada, the S&P/TSX Composite Index was down 1.5%. The White House’s successive announcements of new tariffs, particularly on steel, aluminum and possibly auto parts, depressed investor sentiment. Even though Canada is linked to the United States by the Canada-United States-Mexico Agreement (CUSMA), the exact scope of the measures was unclear.
Even so, some sectors of the Canadian market managed to hold their own. For example, the materials sector benefitted from the surging price of gold, whose haven status pushed it up to record highs of about US$3,120 an ounce.
The Canadian bond market was also down slightly, with a return of -0.3%, as measured by the FTSE Canada Universe Bond Index. The decline was due partly to uncertainties surrounding the effects of the trade war unleashed by the United States, particularly on inflationary pressures. Even so, the Bank of Canada lowered its key interest rate to 2.75% during the month, stressing that it would have to proceed cautiously, caught between the need to support the economy and the risk of inflation fuelled by geopolitical tensions.
U.S. MARKET
-5.7% (S&P 500 31-03-2025 in CAD)The storm was truly unleashed in the United States. The S&P 500 Index fell 5.7% in Canadian dollars and 5.6% in U.S. dollars, for its biggest monthly decline since 2022. All sectors, except utilities, ended the month lower, but it was U.S. mega-caps – the so-called Magnificent Seven – that contributed the most to the downturn. The reasons were the multiple tariff announcements and the prospect of an inflationary shock, which revived fears of stagflation – a scenario where growth slows while prices keep rising.
The Personal Consumption Expenditures Price Index, the U.S. Federal Reserve’s preferred inflation metric, showed that core inflation (excluding energy and food) accelerated to 2.8% in February. At the same time, households’ long-term inflation expectations jumped to 4.1%1, the highest level since 1993.
The Conference Board Consumer Confidence Index also fell to its lowest level since 2021. This index measures U.S. households’ perception of the current economic situation and their outlook over a six-month horizon. A sharp decline suggests that households have become more worried about the future, which may dampen their propensity to spend – a key factor in a country where consumption accounts for nearly 70% of GDP.
INTERNATIONAL MARKETS
-0.4% (MSCI EAFE 31-03-2025 in CAD)Developed markets outside North America were relatively resilient for most of the month but weakened at the end of the period as the risk of universal-tariff announcements in the United States became clearer. The MSCI EAFE Index returned -0.4% in Canadian dollars, but the decline was more pronounced in local currencies, with a return of -2.7%.
Some countries, such as Germany, benefited from the announcement of plans to spend massive amounts on infrastructure and defence, which helped support the market. From a sector perspective, financials, energy and utilities were the biggest gainers, while consumer discretionary and information technology posted the largest declines.
EMERGING MARKETS
0.6% (MSCI Emerging Markets 31-03-2025 in CAD)Emerging markets held up better than developed markets in March, with the MSCI Emerging Markets Index up 0.6% in Canadian dollars and 0.3% in local currencies. China offered a positive surprise with a recovery in consumption and better-than-expected industrial output growth, supported by the government’s targeted measures. India also turned in a strong performance after a series of monthly declines.
Even so, the risks remain high. The new U.S. tariff barriers could disrupt global supply chains, posing a threat to exporting economies, such as Taiwan and South Korea. Taiwan, whose technology sector is heavily dependent on trade with the United States, was the main drag on performance in March.
