03/13/2025
Markets have been roiled this month by on-again/off-again tariffs and talk of the possibility of a recession in the United States. This uncertainty has led to declines in the S&P500 of 10%, and 14% from the tech heavy NASDAQ. The Dow Jones and TSX have been affected less so with declines of 9% and 6% from their highs. We believe that we are witnessing normal market corrections and that this is not indicative of an imminent recession in the US.
The week began by reacting to weekend comments from Mr. Trump who refused to rule out the possibility of a recession. This came after Jerome Powell, Chairman of the US Federal Reserve, said on Friday that, “The US economy continues to be in a good place.” He highlighted consistent GDP growth, robust job creation, rising employment and wages, and stable inflation rates. The numbers don’t lie. This is not the environment of a recession.
Mr. Powell was nominated to the Federal Reserve in 2012 by Barack Obama, elevated to Chairman by Donald Trump in 2018, and re-nominated to the position by Joe Biden. We tend to believe Mr. Powell’s words over those of Mr. Trump. Mr. Trump’s comments, however, sent the markets into a tizzy on Monday, despite an attempt to roll them back this week and a direct contradiction from US Commerce Secretary Howard Lutnick.
We believe that these comments were the excuse that the markets were looking for to have a normal 10% correction. This is not the time to panic. To quote Sir John Templeton, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”
While trade wars will continue to dominate headlines for the foreseeable future, we believe that the worst, in terms of market reaction, is behind us. Both the Bank of Canada and the Federal Reserve have room to cut rates further if necessary, as we saw from the Bank of Canada this morning. While the likelihood of a mild recession in Canada remains a distinct probability, lower interest rates and a change of government should mitigate any impact on our markets.
John Webster, BComm, LLM, CIM
President
Queensbury Securities Inc
