The first quarter of 2025 was not kind to North American stock markets.  In the month of March, the Nasdaq posted a loss of 8.21%, the Dow Jones fell by 4.19%, the S&P 500 gave back 6.28%, and the TSX retreated 1.87%. The S&P 500 suffered its worst quarterly loss in nearly three years, as Trump tariffs and related uncertainty impacted the U.S. stock market over the past several weeks. Bitcoin also was a big loser in the first quarter, sinking 11.8%.

Gold futures gained 19.3%, hitting record levels in their best quarterly performance in more than 38 years, acting as a safe haven amid the economic uncertainty.  U.S. copper futures rallied 25.9% in the best quarter since Q1 2009. Much of that gain reflects President Donald Trump pledging to impose copper tariffs and U.S. copper prices are much higher than in London.  There was sector rotation in Q1 into more defensive industries such as insurance as the magnificent seven stocks of Meta, Apple, Amazon, Google, Microsoft, Nvidia, and Netflix have currently relinquished their leadership role for now.

This sector rotation could unwind very quickly as the market settles down amid the shifting landscape of tariffs and political positioning.  Historically, copper prices have been an indicator of future economic activity, as higher copper prices suggest greater economic activity.  However, in this case the possible tariffs on copper are likely distorting the picture.

This alone cannot explain all the price increases; perhaps greater economic activity is also contributing. Time will tell.

As we have previously outlined, the impact of political changes in the United States is not a short-term phenomenon but will influence markets and economies globally for years to come. We are at the beginning of a tectonic shift led by the U.S.  Just as the U.S. led the world into the post-war consensus, it is now leading it into a new post-liberal era.

Various market indicators have been giving conflicting signals over the past several months.  When the market underperforms in the first quarter of the year, this is typically a negative indicator for performance in the remainder of the year.  However, historical cycle patterns after a presidential election suggest a strong market rebound beginning sometime in April or May and continuing for the rest of the year.  The markets experienced a correction in the first quarter, which, at this point, remains within normal market correction territory.  Conditions are fluid, and we are monitoring various market indicators that could signal a longer-term shift in market behaviour.

The signals coming from the U.S. administration and media reports may seem confusing to many, but there is a grand strategy at work. To better understand the strategy, we are providing a link below to a paper written by Stephen Miran who is now chairman of the Council of Economic Advisers (CEA) for the Trump administration.

The paper titled – A Users Guide to Restructuring the Global Trading System – provides the blueprint for the economic and political strategy of the U.S.  This strategy reflects what key figures in the Trump administration believe must be accomplished to maintain U.S. economic power and ensure a strong domestic economy.  Changes are needed in the current post-war economic order, which was crafted under circumstances that no longer exist or have dramatically changed.  The U.S. must lead the transition to a new global order- otherwise, external events and other nations will dictate the terms of change.

The paper is an excellent read for those who want to understand what the U.S. is trying to accomplish.   Achieving this strategy will require a delicate balancing act with many variables. We certainly live in interesting times.

On a final note, the market may correct further, and volatility may persist.  High bearish indicators, which are typical of market bottoms, have not yet been reached, although market optimism has contracted substantially.

Overall, the bull market remains intact but is a little more suspect; we continue to monitor indicators for any signs of a change of character in the market.