Trump tweets chaos; the TSX keeps calm and carries on
Donald Trump sent shockwaves through markets with a bold proposal to slap a hefty 25% on goods from Mexico and Canada, plus an additional 10% tariff on Chinese imports. Initially, these threats rattled investors, but sentiment shifted as they were interpreted as bargaining manoeuvres, rather than concrete policy. The S&P/TSX 60 even managed to stay slightly positive, despite the headlines. Analysts, including Goldman Sachs, suggested such tariffs could push Canada into a recession while also jolting U.S. inflation higher by as much as 1% in short order. However, a swift follow-up announcement of a border agreement with Mexico added further weight to the notion that these tariffs were more about leveraging negotiation power than actual economic upheaval. For now, markets appear unfazed, with little cause for immediate concern. In fact, some are starting to think that this is actually not as bad as feared, especially when it comes to the U.S.’s policy on China.
Wall Street, meanwhile, reacted favourably to the nomination of Scott Bessent as Treasury secretary. The macro hedge fund manager behind Key Square Group is expected to balance Trump’s push for tax cuts with a steady hand on financial markets. His appointment soothed fears of a runaway inflation agenda that had triggered a sell-off in government bonds since the election, pushing U.S. Treasury yields to a four-month high. Traders are betting that Bessent’s expertise will bring much-needed stability as Trump rolls out his economic plans. While Bessent is not as famous as Janet Yellen when she was nominated, he appears to be a highly competent and serious person (a welcome change when it comes to the latest nominations, all politics aside).
As Americans gathered for Thanksgiving, the holiday also carried a noteworthy historical trend for investors. Since 1950, the S&P 500 has delivered gains 80% of the time between the Tuesday before Thanksgiving and the second trading day of the new year, with an average return of 2.6%. While the markets closed early for the holiday, many are optimistic that this seasonal pattern could provide a lift heading into year-end. Time will tell.
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