The first quarter of 2018 has been one of the most turbulent in the history of financial markets – this after experiencing exceptionally low volatility in 2017.
On interest rates, both the Bank of Canada (BoC) and the US Federal Reserve (the Fed) raised rates. The BoC increased rates in January and then put the brakes on at the next meeting. The Fed did nothing in January but did the opposite by raising rates in March. Again, uncertainty is the word when we speak about interest rate changes.
President Donald Trump continues to fire shots around trade wars by proposing to place a 25% tariff on steel and a 10% tariff on aluminum entering the US. This was followed by proposing to place tariffs on $60 billion in Chinese exports. With the threat of trade wars looming, the market will continue to be volatile until the issues are resolved.
President Trump agreed to meet with North Korean leader Kim Jong Un to discuss the denuclearizing of the Korean Peninsula. The meeting date still remains to be determined.
The Canadian economy started the year with employment softening, while home sales continue to disappoint. With recent rate hikes by the BoC, the pressure on consumers is steadily increasing. The S&P TSX Composite Index was down 4.5% on the quarter.
The recent market volatility driven primarily by trade war rhetoric will subside as cooler heads prevail and it becomes evident there will be no clear winner. Market returns will be driven by fundamentals and interest rate policy. Fundamentals continue to be strong and will likely result in higher interest rates going forward. In this environment, equity markets should be positive but likely will not experience the above average returns that we have enjoyed over the last couple of years.
President, HG Partners Limited
Director, Private Client Group &
Senior Financial Advisor,
This article was prepared solely by Howard Goodman who is a registered representative of HollisWealth® a trade name of Investia Financial Services Inc. (a member of the Mutual Fund Dealers Association of Canada and the MFDA Investor Protection Corporation). The views and opinions, including any recommendations, expressed in this article are those of Howard Goodman alone and they are not those of HollisWealth®
HG Partners Limited is an independent company. iA Financial Group and Industrial Alliance companies have no liability for activities outside of HollisWealth®