March 2025 Market Recap
Last Month in the Markets: March 2025
What happened in March?
Equities experienced a very difficult month with the Dow losing 4.2%, the S&P 500 dropped 5.8%, and the NASDAQ plummeted 8.2%. Canada’s TSX fell by only 1.9%, making it the top performer among major indexes. A 1.9% drop typically is not regarded as a success, but in March the TSX fared much better than American indexes. The allure of the formerly high-flying S&P 500 has lessened as it experienced its worst month since 2022. The much more temperate TSX now leads the U.S. indexes Year-to-Date. The conditions for this decline after two stellar years for equity index performance is attributed to, and admitted by, Donald Trump. The effects of his proposed and implemented tariffs on imports to the U.S. are well understood by the markets. The cost of tariffs will either be absorbed by companies (lowering their profitability), passed on to purchasers (increasing inflation), or a combination of the two.
On the commodities front, the price of gold has jumped close to 20 percent in 2025, and close to 40 percent over the past year. Its continuing with its reputation as a safe-haven investment to protect against losses elsewhere, typically when uncertainty threatens equities.
The notable events in March included:
1. March 6th, 2025
The European Central Bank (ECB) cut its interest rates by ¼ percent (25 basis points).
2. March 7th, 2025
In Canada, employment was virtually unchanged (+1,000) and the unemployment rate held steady at 6.6%. Hourly wages have risen 3.8% on a year-over-year basis.
According to the Bureau of Labor Statistics (BLS), U.S. jobs rose by 151,000 in February, which was higher than expected, while the unemployment rate was unchanged at 4.1%. Wages have risen 4.0% over the last year. The latest U.S. jobs data suggests that the next Federal Reserve rate cut will occur in the second half of 2025.
3. March 12th, 2025
The Bank of Canada reduced its target for the overnight rate again. The announcement cited, “the pervasive uncertainty created by the continuously changing U.S. tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest. Against this background, and with inflation close to the 2% target, Governing Council decided to reduce the policy rate by a further 25 basis points to 2.75%.”
U.S. consumer prices increased 0.2 percent in February, and on a year-over-year basis the all-items index increased 2.8 percent before seasonal adjustment.
4. March 14th, 2025
Mark Carney, former central banker, replaced Justin Trudeau as Prime Minister.
5. March 19th, 2025
The Federal Reserve kept U.S. interest rates steady. The statement cited, “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate, if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”
6. March 28th, 2025
Equities initially moved lower again with the U.S. Bureau of Economic Analysis’ release of the Personal Consumption Expenditures price index (PCE), which is the Federal Reserve’s preferred inflation measure. Inflation for February was 2.5% and Core PCE, excluding food and energy, ticked higher than expected to 2.8% from one year ago. The uncertainty surrounding inflation and tariffs continues to linger.
Canadian Gross Domestic Product (GDP) rose 0.4% in January, a slight increase over the 0.3% increase in December. 13 of 20 sectors rose with goods-producing sectors delivering the largest increase at 1.1%. Mining, quarrying, and oil and gas extraction provided the largest increase. The largest drag on growth occurred in the retail trade sector, which contracted 0.9%.
Additionally on March 28th, the first telephone call occurred between Prime Minister Carney and President Trump where they discussed economic and security matters as the Canadian federal election looms. Both sides indicated that the call was substantive and constructive, which is welcome news for Canadians and Americans who are directly affected by the trade war.
What’s ahead for April and beyond?
Yesterday, on April 2nd, Donald Trump announced additional details on his global tariff plan during a press conference from White House Rose Garden. During his speech, President Trump presented a table with tariffs to be charged on goods from 60 countries, including China (34%), European Union (20%), Taiwan (32%), Japan (24%), India (26%), and the United Kingdom (10%).
Canada and Mexico were not on the list of countries contained in the table shared at the press conference. Immediately afterwards, American officials stated that goods that are compliant with the USMCA Agreement are exempt from additional tariffs. The tariffs introduced in February and March on steel, aluminum, energy, consumer vehicles and auto components imported from Canada, and Canada’s tariffs imposed on $30 Billion of U.S. goods will remain in-place.
Lastly, the next round of interest rate decisions by the Bank of Canada and the Federal Reserve will occur on April 16th and May 7th, respectively.
What does this mean for you and your portfolio?
As uncertainly in the world remains, we expect to see a lot of volatility in the markets over coming days. This volatility may settle as we get through April and things become more well known. While the volatility that we’re seeing may be uncomfortable for some, we recommend not making any changes to your portfolio during this period, as this course of action is generally a losing proposition. Currently, financial markets – and the world at large – are striving to gain a clearer view of what lies ahead. We’ll be watching the evolution of this closely, and we’ll continue to keep you informed with any updates. In the meantime, staying focused on long-term goals and maintaining a steady approach will help weather the current volatility that we’re seeing. Adhering to your long-term strategy is key to navigating uncertainty and emerging stronger when the market stabilizes.
