Monthly highlights of major events which drive financial markets, along with perspectives on what they mean and why they matter.
January in review
Stocks rebounded in January, recovering from the previous month’s pullback. Canadian equities rose by 3.48%, fueled in part by the Bank of Canada’s 25 basis-point rate cut designed to support economic growth amid escalating trade tensions and political uncertainty. Additionally, rising prices for key commodities such as oil and metals, which are significant components of the index, contributed to the gains. Commodity prices saw notable increases, with gold, oil, and copper rising by 6.34%, 1.80%, and 6.34% respectively, while natural gas declined by 1.74%. U.S. stocks climbed 2.78% in U.S. dollar terms, with all S&P 500 sectors posting gains except Information Technology which was down 2.90%. Bonds also advanced, with Canadian and U.S. bonds up 1.20% and 0.53%, respectively, as inflation showed signs of easing. Emerging Market equities gained 1.81%, reflecting improved global sentiment.
Here are some of January’s most notable events:
Global trade conflicts on the rise. Following his inauguration on January 20th, U.S. President Donald Trump proposed a series of new policy initiatives. On February 1, he signed an Executive Order imposing a 25% tariff on imported goods from Mexico and Canada (except for energy, which received a lower 10% tariff), as well as a 10% tariff on Chinese goods. While the proposed tariffs on Canada and Mexico were later deferred into March, the measures were not entirely unexpected, as Trump had openly discussed introducing tariffs throughout his electoral campaign. The Trump administration claims it is holding Canada accountable for the unchecked flow of migrants and fentanyl across its border into the U.S. Aside from tariffs, President Trump generally has a pro-business, pro-growth policy agenda, which could be beneficial for the U.S. economy and markets over the long term.
Chinese AI breakthrough pushes American tech stocks lower. The unveiling of a cost-effective Artificial Intelligence (AI) model by Chinese startup DeepSeek sent shockwaves through the technology sector, triggering a broad sell-off in U.S. tech stocks in January. Companies heavily reliant on AI-driven revenues, such as Nvidia, AMD, and Microsoft, saw sharp declines as investors worried about increased competition from emerging players in China. The development raised concerns that the AI sector may be experiencing an unsustainable bubble, drawing comparisons to the dotcom crash of the early 2000s. DeepSeek’s breakthrough underscores the rapid pace of technological disruption, reinforcing the importance of diversification in investment portfolios to navigate periods of heightened volatility and sector-specific risks.
| Index† | Change (%) | Index Level | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Treasury Bill (FTSE Canada 60 Day T-Bill) | 0.31 | 0.31 | 4.64 | 186.29 |
| Canadian Bonds (FTSE Canada Universe Bond) | 1.20 | 1.20 | 6.94 | 1,182.88 |
| Canadian Equities (S&P/TSX Composite) | 3.48 | 3.48 | 25.19 | 25,533.10 |
| U.S. Bonds (Barclays U.S. Aggregated Bond, US$) | 0.53 | 0.53 | 2.07 | 2,200.64 |
| U.S. Equities (S&P 500, US$) | 2.78 | 2.78 | 26.35 | 6,040.53 |
| Global Equities (MSCI World, US$) | 3.55 | 3.55 | 21.96 | 3,836.58 |
| Emerging Marketings (MSCI Emerging Markets, US$) | 1.81 | 1.81 | 15.29 | 1,093.37 |
| Currencies† | Change (%) | Exchange Rate | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| C$/US ($) | -1.08 | -1.08 | -7.62 | 0.6877 |
| C$/Euro (€) | -1.15 | -1.15 | -3.53 | 0.6638 |
| C$/Pound (£) | -0.11 | -0.11 | -5.40 | 0.5550 |
| C$/Yen (¥) | -2.34 | -2.34 | -2.36 | 106.783 |
| Commodities (US$)† | Change (%) | Price | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Gold Spot ($/oz) | 6.34 | 6.34 | 31.01 | 2,835.00 |
| Oil WTI ($/barrel) | 1.80 | 1.80 | 1.23 | 72.53 |
| Natural Gas ($/MMBtu) | -1.74 | -1.74 | -5.90 | 3.04 |
†Total Return, as at January 31, 2025. Indices are quoted in their local currency.
Source: Bloomberg
Indices are not managed, and it is not possible to invest directly in an index.
European markets shine amid global uncertainty. In January, European equities outperformed global markets, driven by easing concerns over U.S. tariffs and a rotation away from U.S. technology stocks. Seeking stability, investors poured into European blue-chip stocks, propelling the MSCI Europe Index to a record high with a 7.31% gain in Canadian dollar terms. The rally reflected growing confidence in the region’s economic strength, bolstered by strong corporate earnings, stabilizing inflation, and robust economic data. Additionally, supportive monetary policies from the European Central Bank contributed to the surge. This combination of factors created a favorable environment for European equities to start 2025 on a strong note.
Did you know?
Tariffs are taxes on imported goods that governments use to protect local businesses, raise money, influence trade, or encourage local production. They can be a percentage of an item’s price or a set fee per product. While tariffs can help spur competition, they also make imported goods more expensive for consumers. Sometimes, countries use tariffs as a bargaining tool in trade deals or to respond to unfair trade practices. However, too many tariffs can lead to higher prices, slower economic growth, and trade conflicts. If one country raises tariffs, others might do the same, which can disrupt global trade. Experts debate whether tariffs help or hurt in the long run, as they can both protect and challenge economies.
