Global Economy and Markets Under the Shadow of Tariffs: How to Build a Resilient Investment Strategy
Amid renewed tariff threats from the Trump administration, global markets have experienced renewed turbulence. Tariff policies can have far-reaching impacts on inflation, consumer confidence, corporate investment decisions, and even international relations. In this heightened climate of uncertainty, how should investors interpret the macroeconomic signals behind these developments? What key variables will shape market movements ahead? And how can one strike a balance between stability and growth during volatile times?
In AimStar’s latest strategy report, Scott Cheng, Senior Vice President and Portfolio Manager, notes that the Trump administration’s tariff actions are injecting significant uncertainty into the global economic outlook, inflation trajectory, and market sentiment.
Key Highlights from the Report:
Short-Term Strategy: Adopt a defensive asset allocation by increasing exposure to fixed income and defensive equity sectors.
Medium-Term Outlook: Stay responsive to macroeconomic indicators and corporate earnings data, with flexibility to adjust portfolio allocations accordingly.
Long-Term Core View: Maintain diversification and a long-term investment approach, seizing opportunities during structural pullbacks.
The report also points out that current market valuations have corrected to relatively reasonable levels. Should trade tensions ease or the Federal Reserve signal a shift toward monetary accommodation, a technical rebound may follow.
👉 For the full analysis, read the article:
BoC Faces Uncertainty Ahead of Rate Decision Amid Tariff Turmoil
The Bank of Canada paused rate cuts in April to assess the impact of U.S. trade policy and domestic economic conditions. Yet recent developments have only added uncertainty.
While a U.S. court temporarily ruled against President Trump’s tariff authority, Trump responded by proposing to double steel and aluminum tariffs to 50%, impacting major Canadian exports.
Domestically, April inflation came in hotter than expected, driven by volatile components like airfare and rents, as well as Canadian retaliatory tariffs. Desjardins economist Jimmy Jean noted that the inflation spike is likely temporary and predicts Ottawa may not pursue its full $185 billion tariff list due to improving U.S.-Canada dialogue and legal hurdles facing Trump.
Despite inflation pressures, weaker labor data point to a softening economy. Private sector job losses and slowing hiring momentum suggest recession risks are mounting. Economist David Rosenberg argues the Bank should resume easing, while markets currently assign only a 20% chance of a cut this Wednesday.
Royal Bank economists expect a hold, citing resilient consumer spending and early signs of labor market stabilization. Still, with Canada having already cut more than peers, the BoC has room to ease further if the downturn deepens.
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TRENDS IN INDICES
Canadian Stock Market:
TSX Dips Despite Monthly Rally; BRP Soars on Earnings Beat
Canadian equities ended slightly lower on Friday as mixed economic signals and global trade tensions weighed on sentiment. The S&P/TSX Composite Index dropped 36 points to close at 26,175, but still posted a strong monthly gain of 5.4% — its best in six months.
Healthcare and energy stocks dragged the index down, offsetting strength in consumer, financials, and industrials. BRP (TSX:DOO) led gains, jumping nearly 8% after posting a 279% surge in Q1 net profit driven by cost controls and FX gains. Laurentian Bank, G Mining Ventures, and EQB also posted solid gains, while Tilray, Ivanhoe Mines, ATS, and Baytex fell sharply.
Today, surging commodity prices amid Russia-Ukraine tensions could boost TSX resource stocks. Markets await U.S. manufacturing data and comments from Fed Chair Jerome Powell for further direction.
U.S. Stock Market:
S&P 500 and Nasdaq Post Strongest Monthly Gains Since 2023 Despite Trade Uncertainty
U.S. equities ended flat on Friday, capping a volatile May marked by shifting trade rhetoric from former President Donald Trump. The S&P 500 slipped 0.01%, while the Nasdaq declined 0.32% — though both indexes posted their strongest monthly gains since November 2023, rising 6.2% and 9.6% respectively.
Market sentiment fluctuated due to unpredictable tariff announcements, but strong earnings and softening inflation, as shown by April’s PCE price index at 2.1% YoY, supported a rebound from April lows. Despite initial hopes for lower tariffs, a U.S. appeals court’s emergency hold means elevated trade levies remain in place.
Analysts say investor confidence remains fragile amid policy uncertainty, with the S&P 500 now just 4% below its all-time high.
Currency Markets:
Dollar Mixed as Tariff Uncertainty Lingers; Yen Posts First Monthly Loss of 2024
The U.S. dollar ended Friday mixed, with USD/JPY logging its first monthly gain since December amid lingering concerns over revived Trump-era tariffs. A federal appeals court reinstated Trump’s sweeping tariff authority, despite a prior ruling that he had overstepped legal limits.
Markets now expect some form of tariffs to persist, even if court rulings eventually limit their scope. Trade talks have stalled, and Treasury Secretary Bessent acknowledged tariffs remain a key revenue source as tax cuts are debated in Congress.
Consumer spending and inflation cooled slightly in April, while U.S. goods trade deficit narrowed. Analysts note more data weakness is needed to push the dollar lower. USD/JPY slipped 0.21% to 143.88, but rose 0.6% in May. EUR/USD dipped 0.12% to 1.1356, as soft German inflation supports ECB rate cuts this week.
Gold Market:
Gold Pulls Back as Dollar Gains, Rate Cut Hopes Remain
Gold prices fell on Friday, with COMEX gold futures closing down 0.9% at $3,315.40/oz, bringing the weekly loss to 1.9%. The decline followed a rebound in the U.S. dollar and markets adjusting to revived tariff tensions after a federal appeals court reinstated former President Trump’s broad tariff powers.
Weaker-than-expected U.S. PCE inflation (2.1% YoY vs. 2.2% expected) supported expectations for a potential Fed rate cut in September. However, physical gold demand in India remained subdued due to higher local prices and fading wedding season demand.
Other precious metals also fell: silver slid 1.2%, platinum lost 2.5%, and palladium dipped 0.6%.
Oil Market:
Oil Prices Dip as OPEC+ Extends Output Hike Amid Trump Tariff Pressures
U.S. crude futures slipped 0.25% to $60.79 on Friday as OPEC+ agreed to extend its 410,000 barrels/day production increase into July — the third consecutive monthly hike. Brent crude closed down 0.39% at $63.90, while the more liquid August contract fell 1.12%.
Saudi Arabia’s shift from supply restraint raised speculation over motives: placating the U.S., reclaiming market share, or punishing quota violators. Some insiders expect further hikes could be discussed in upcoming OPEC+ meetings.
Market sentiment was further dampened by a U.S. appeals court reinstating Trump’s broad tariff authority, pressuring commodities.
Financial Market Data Copyright © 2025 AimStar myportfolio. Data as of June 02, 2025, 11:00AM EST
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WHAT'S HAPPENING THIS WEEK
Monday, June 2
United States: Final S&P U.S. Manufacturing PMI (May), ISM Manufacturing PMI (May), Construction Spending (April), Speeches from Fed Chair Jerome Powell, Dallas Fed President Logan, and Chicago Fed President Goolsbee.
Canada: Calgary Real Estate Board to release May home sales data, reflecting continued market uncertainty amid economic headwinds.
Earnings: Campbell’s (CPB), Science Applications International (SAIC)
Tuesday, June 3
United States: Factory Orders (April), Job Openings and Labor Turnover Survey (JOLTS) (April), Speeches from Dallas and Chicago Fed Presidents.
Canada: Vancouver Real Estate Board to release May home sales data; Hudson’s Bay returns to court seeking approval of a $30 million intellectual property deal with Canadian Tire; the court will also hear RioCan REIT’s application regarding a joint venture receivership; Canadian Telecom Summit opens.
Earnings: CrowdStrike Holdings, Ferguson Enterprises (FERG), Hewlett Packard Enterprise, Dollar General, Guidewire Software (GWRE), NIO
Wednesday, June 4
United States: ADP Employment Report (May), Final S&P U.S. Services PMI (May), ISM Services PMI (May), Federal Reserve Beige Book, Speech by Atlanta Fed President Bostic.
Canada: Toronto home sales data for May; Bank of Canada interest rate decision.
Earnings: Dollar Tree, Descartes Systems Group (DSGX), Five Below, PVH Corp (PVH), Thor Industries (THO)
Thursday, June 5
United States: Initial Jobless Claims (Week ending May 31), Trade Balance (April), Q1 Productivity Revision, Speech by Philadelphia Fed President Harker.
Canada: Canadian Telecom Summit continues.
Earnings: Broadcom, Lululemon Athletica (LULU), Samsara (IOT), Rubrik (RBRK)
Friday, June 6
United States: Non-Farm Payrolls Report (May), Consumer Credit (April)
Canada: May Labour Force Survey
Published by Vikki Zhao
June 2 , 2025 17:00 AM EST. 10 min read
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