The latest Gross Domestic Product (GDP) report revealed that the Canadian economy grew by 0.4% in January, driven by a broad-based expansion led by goods-producing industries. Exporters ramped up shipments ahead of impending tariffs, providing a temporary boost to economic activity.
On March 12, 2025, the Bank of Canada (BoC) lowered its overnight lending rate by 25 basis points to 2.75% to support growth and stabilize financial conditions.
With Trump’s sweeping tariffs, their unpredictable rollout, and retaliatory measures continuing to weigh on Canada’s economic outlook, the BoC faces the challenge of shaping a monetary policy that strikes a balance between rising inflation and weakening consumer and business spending.
Canadian bonds were down in March as concerns about inflation pushed the yields higher. The FTSE Canada Bond Universe index returned -0.3%, while the YTD performance is still positive, standing at 2.0%.
It was a turbulent quarter for equities as concerns about impending tariffs, inflation, economic growth, and geopolitical tensions infused fears into the market. U.S. equities (S&P 500) closed the month down 5.6% in March and are down 4.3% since the beginning of the year.
Despite negative results in March (-1.5%), the Canadian equities (S&P/TSX) finished the quarter on the upside, returning 1.5%. Canadian sectors posted mixed performance for the quarter, with Materials leading, up 20.3%, while at tail of the pack, Health Care fell 9.0%.
5 Need-to-Know Takeaways for Canadian Parents
- A Small Economic Boost: Canada’s economy grew by 0.4% in January, largely because exporters rushed shipments before U.S. tariffs kicked in. It’s a temporary lift—not long-term growth.
- Interest Rate Cut to Support Families: On March 12, 2025, the BoC lowered its rate to 2.75% to help ease borrowing costs and stimulate economic activity as tariffs and inflation loom.
- Tariffs = Tough Balancing Act: With Trump’s tariffs and Canadas retaliation, the BoC is walking a tightrope—trying to curb inflation while supporting families and businesses facing higher costs.
- Bonds Took a Hit: Inflation fears caused bond yields to rise, meaning Canadian bonds dipped -0.3% last month. But the year-to-date return is still in the green at +2.0%
- Markets Were Volatile—But Canadian Stocks Held Up: Despite a rough march (TSX down 1.5%), Canadian equities still delivered a +1.5% return for the quarter. Materials soared (+20.3%), while Health Care lagged (-9.0%)
