Resilience meets uncertainty
Global economic growth is stabilizing but remains underwhelming, with the International Monetary Fund (IMF) projecting 3.3% growth for 2025, steady from 2024 but below pre-pandemic averages.
The U.S. economy, despite a projected slowdown to 1.8% growth due to tariff impacts and cooling momentum, continues to display relative strength supported by a robust labor market and consumer spending.
Europe however, struggles with sluggish growth, while China faces a structural slowdown, with growth expected to decline to 4.5% amid weak domestic demand.
Emerging markets, particularly those tied to global trade, face headwinds from trade disruptions though commodity exporters in the Gulf and Africa benefit from elevated resource prices.
Inflation
Inflation is easing globally and is projected to fall in 2025, but persistent services inflation and potential tariff-induced price pressures could delay central bank rate cuts.
The U.S. Federal Reserve is expected to lower rates to 3%-3.25% by year-end, but geopolitical risks and policy uncertainty may temper the pace of monetary easing.
Volatility & sectoral shifts
Recent market swings underscore the fragile sentiment. The S&P 500 surged 9.5% on April 9 following a 90-day pause on certain U.S. tariffs, its largest single-day gain since 2008, only to drop 4.6% the next day as trade tensions with China escalate.
The Nasdaq and Russell 2000 have already entered bear market territory, with the VIX index signaling elevated fear not seen since 2023.
Market breadth has weakened, with fewer stocks trading above their 200-day moving averages reflecting broad-based declines.
Gold has been a standout performer, reaching $3,167.57 per ounce up 15% year-to-date. Equities, particularly cyclicals like financials and industrials, are favored as growth re-accelerates, while technology retains leadership due to generative AI advancements.
Canada election tension
Canada’s federal election on April 28 is a critical event, with Prime Minister Mark Carney calling a snap election to capitalize on the Liberal Party’s polling lead after Justin Trudeau’s resignation.
The campaign, the shortest allowable at 37 days pits Carney’s Liberals against Pierre Poilievre’s Conservatives in a tight race, with polls showing the Liberals at 37.5% and Conservatives at 37.1%.
The election, overshadowed by U.S. trade tensions and Trump’s annexation threats, focuses on affordability, housing, and Canada-U.S. relations. A Liberal majority could stabilize markets with pro-trade policies. A Conservative win may prioritize tax cuts and resource development, potentially boosting energy and mining sectors but risking trade friction.
As of writing, the Liberals, led by Mark Carney, have secured a fourth term with final results yet to be revealed.
President Trump’s second term, approaching its 100-day mark on April 30, is driving uncertainty. His administration’s volatile policy mix marked by aggressive tariffs, deregulation, and immigration restrictions has kept markets on edge.
Tariff troubles
The 90-day tariff pause (excluding China) provided temporary relief, but 125% tariffs on Chinese imports signal escalating trade wars, strengthening the U.S. dollar and pressuring emerging market currencies like the RMB.
The Russia-Ukraine and Israel-Hamas wars continue to drain resources and fuel regional instability, with risks of escalation impacting energy and food security. Tensions in the South China Sea, driven by China’s military presence heighten the risk of miscalculations, potentially disrupting trade flows.
Protectionist policies, including U.S. tariffs and EU-China trade conflicts, threaten global supply chains, with firms delaying capital expenditures amid unclear regulatory outlooks.
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