Friends and enemies,
Good morning from sleepy Southern Ontario, where sciatica is raging on my right side and I’ve switched from coffee to tea for the 50th time over the last five years or so.
Lots to talk about this week, including some recent policy proposals from Poilievre leading up to what should be an ELECTRIC (for Canada) election season for us Canucks. I;m seeing osme enthusiasm for the PP platform – mostly around two key policies related to Canadian investing – but I have my doubts. In both the TFSA Top Up and the Capital Gains Canadian Investment Exclusion, I’m left wondering why any Canadian should be pushed into making a choice between having their investing profits stolen through unfair taxes (IMO, capital gains should be tax free – all productive activity should be, but whatever) or re-investing them into underperforming Canadian companies, measured in an underperforming currency, and now also being artificially propped up by people who think they’re part of this weird elbows up! movement? Don’t forget that some of the biggest pensions – OMERS, Ontario Teachers, etc – are invested in US markets to the tune of 1.6 trillion dollars, and I doubt very much they’re going to find any nationalistic streak any time soon. Nor should they.
Canadians are so scarred by paying some of the highest tax rates in the world that these measures – even though they’re adjacent to capital controls in my view – are getting tons of press.
Probably the funniest part, though, was Poilievre offering the example of selling real estate and then using the tax-free proceeds to invest in more real estate.
They’ll never learn!
Elsewhere this week:
This is obviously an AI generated set of stories, though it’s been curated by yours truly, and they reflect some of the important notes from the week. Some notes about the trade war, housing and – what I think is very important – the Lulu Signal. Purely anecdotal came to me in a dream nonsense here, but if the Lulu age women are still buying/being gifted the world’s greatest leggings leading into summer, things aren’t that bad yet. You know those leggings are $110 CAD? I realize that these things are delivering results just short of cosmetic surgery for some women, but squats and lunges are free.
Enjoy, see you Monday night!
Key Points
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It seems likely that trade tensions with the U.S., driven by Trump’s tariffs, were a major story, impacting market volatility with a 1.6% drop in the TSX on March 28, 2025.
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Research suggests weak economic data, including a 0.6% drop in January retail sales and a 4.3% decline in February housing starts, signaled economic slowdown concerns.
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The evidence leans toward market speculation about future Bank of Canada rate cuts, following a recent cut to 2.75%, amid uncertainties from trade policies.
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Lululemon’s strong Q4 earnings on March 27, 2025, likely provided a positive note, showing resilience in certain sectors.
Market Overview
The Canadian market experienced significant volatility last week, largely influenced by ongoing trade disputes with the U.S. and domestic economic indicators. Investors are navigating a complex landscape, with both global and local factors at play.
Trade Tensions and Tariff Impacts
Trade tensions escalated as President Trump’s administration imposed 25% tariffs on Canadian imports, prompting Canada to retaliate with its own tariffs. This back-and-forth has heightened market uncertainty, contributing to a notable 1.6% drop in the S&P/TSX Composite Index on March 28, closing at 24,759.15, as fears of a U.S. recession and its impact on Canada grew.
Economic Data Releases
Economic data released recently painted a concerning picture. Retail sales for January 2025 decreased by 0.6%, with an advanced estimate for February suggesting another 0.4% decline, indicating weakening consumer spending. Housing starts also fell by 4.3% in February to 229.03 thousand units from January, with significant year-over-year declines in major cities like Vancouver (-48%) and Toronto (-68%), highlighting potential headwinds for the economy.
Interest Rate Expectations
The Bank of Canada cut its overnight rate to 2.75% on March 12, 2025, and markets are speculating about further cuts. However, uncertainties from U.S. trade policies have clouded these expectations, with financial markets anticipating a possible hold in April before potential later cuts, depending on trade developments.
Company Earnings Highlight
Amid the challenges, Lululemon reported robust Q4 earnings on March 27, 2025, showing strong sales growth, which underscores resilience in certain sectors despite broader economic concerns.
Survey Note: Detailed Analysis of Canadian Market Stories (March 24-30, 2025)
The past week, from March 24 to March 30, 2025, was marked by significant developments in the Canadian market, influenced by both domestic economic indicators and international trade dynamics. This report provides a comprehensive overview, expanding on the key points to offer a detailed analysis for investors and market watchers.
Trade Tensions and Tariff Impacts
The trade dispute with the United States, particularly President Donald Trump’s imposition of 25% tariffs on Canadian imports, has been a dominant narrative. These tariffs, announced earlier in March and effective from early that month, prompted Canada to retaliate with its own tariffs, escalating tensions. The New York Times reported on the furious reaction in Canada, with political figures like Pierre Poilievre criticizing the move and proposing countermeasures. Reuters noted that these actions could upend nearly $2.2 trillion in annual U.S.-Canada trade, raising fears of a global trade war (Reuters). The uncertainty contributed to market volatility, with the S&P/TSX Composite Index dropping 1.6% on March 28, closing at 24,759.15, as per data from The Globe and Mail. This drop was likely exacerbated by an article published on the same day, “Trump’s self-inflicted recession begins to take shape” by Tim Shufelt, which highlighted falling consumer confidence to its lowest in two and a half years and rising long-term inflation expectations, adding to market jitters (The Globe and Mail).
Economic Data Releases
Several economic indicators released in the weeks leading up to and during the period provided insights into the Canadian economy’s health. Retail sales for January 2025, released on March 21, showed a 0.6% decrease to $69.4 billion, led by declines at motor vehicle and parts dealers, as reported by Statistics Canada. An advanced estimate for February, mentioned in TD Economics, suggested another 0.4% decline, indicating ongoing weakness in consumer spending. Housing starts data for February, released on March 17 by CMHC, showed a 4.3% month-over-month decrease to 229.03 thousand units from 239.32 thousand in January, with significant year-over-year declines in Vancouver (-48%) and Toronto (-68%), as detailed in CMHC and TradingEconomics. These figures, while released before the week in question, likely continued to influence market sentiment, contributing to the perception of economic slowdown.
Interest Rate Expectations
Monetary policy remained a focal point, with the Bank of Canada’s decision on March 12, 2025, to cut the overnight rate by 25 basis points to 2.75%, as announced in Bank of Canada. This move, with the Bank Rate at 3% and the deposit rate at 2.70%, was part of efforts to stimulate economic activity amid global uncertainties. However, the unpredictability of U.S. trade policies, particularly Trump’s tariffs, has introduced significant uncertainty. The Globe and Mail reported that financial markets expect the Bank to hold rates steady in April before potentially cutting twice more by year-end to 2.25%, though this outlook remains fluid given trade tensions. Governor Tiff Macklem’s comments emphasized the need for flexibility, noting, “We need to set policy that minimizes the risk. That means being less forward-looking than normal until the situation is clearer.”
Company Earnings Highlight
Amid the broader economic challenges, corporate earnings provided some positive news. Lululemon, a Canadian apparel retailer, released its fourth-quarter earnings on March 27, 2025, reporting robust sales growth, as noted in Yahoo Finance. This performance, likely driven by strong demand both domestically and internationally, highlighted resilience in the consumer discretionary sector. Additionally, ALUULA Composites Inc. reported its Q1 2025 financial results on March 26, 2025, closing an oversubscribed rights offering for gross proceeds of $2,506,100, indicating continued investor interest in certain Canadian firms (Yahoo Finance).
Market Performance and Sectoral Impacts
The TSX’s performance during the week, particularly the 1.6% drop on March 28, reflected the combined impact of these factors. The Globe and Mail provided daily movements, with the index opening at 25,062.83 and closing at 24,759.15 on March 28, a decline of 303.68 points from the open, amid broader market concerns. Sectors likely most affected included those heavily reliant on U.S. trade, such as manufacturing and energy, given the tariff implications.
Unexpected Detail: Retail and Housing Data Timing
An interesting aspect is the timing of economic data releases. While retail sales and housing starts data were released before the week (March 21 and March 17, respectively), their impact lingered, with market analyses and investor reactions continuing into March 24-30. This delayed effect underscores how economic data can shape market sentiment over extended periods, especially in a volatile environment.
Summary and Outlook
The Canadian market is navigating a complex landscape marked by trade tensions, weakening economic indicators, and monetary policy adjustments. The interplay of these factors suggests a cautious outlook, with investors advised to stay informed and consider diversification strategies. The resilience shown by companies like Lululemon offers some optimism, but the broader economic and trade uncertainties remain significant risks.
Table: Key Economic Indicators (March 2025 Context)
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Indicator
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Period
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Value
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Release Date
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Source
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|---|---|---|---|---|
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Retail Sales
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January 2025
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-0.6% (to $69.4B)
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March 21, 2025
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Retail Sales (Estimate)
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February 2025
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-0.4% (advanced)
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Likely March 28, 2025
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Housing Starts
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February 2025
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229.03K units (-4.3% m/m)
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March 17, 2025
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Bank of Canada Rate
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March 12, 2025
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2.75% (cut by 25bps)
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March 12, 2025
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This table summarizes the key data points, providing a snapshot for investors to assess market conditions.
Additional Reading: