In the latest video update:
- Tariff standoff continues
- Bank of Canada’s next move
- Going for gold?
In the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discusses the latest developments in the ongoing U.S. trade tensions. He also shares key considerations impacting potential rate cuts by the Bank of Canada (BoC), and queries whether the momentum in gold prices can last.
Tariff standoff continues
Markets experienced a turbulent week, marked by sharp intra-day swings in equity markets. Both China and the U.S. raised tariffs on each other’s goods, intensifying market anxiety. As a result, Lin notes that markets became extremely oversold, “As of Tuesday, we saw equity markets at the 98th percentile for oversold conditions, based on our proprietary sentiment indicator.”
He adds that such oversold conditions can create an environment where even a small piece of good news can prompt a sharp market rebound. This played out on Wednesday, when U.S. President Donald Trump announced a temporary pause on tariffs for certain trading partners, sparking a surge in equity prices.
However, the rally was short-lived. Despite Thursday’s better-than-expected U.S. inflation data, market volatility persisted, which Lin attributes to continued uncertainty around tariff levels and the broader implications for the global economy.
“Our view is that as long as trade policy uncertainty remains high, volatility will likely continue,” he explains. “But volatility isn’t something investors should fear—it can create opportunity if approached with discipline and a focus on long-term objectives.”
BoC next move
Shifting to the Canadian economy, Lin says the BoC is likely to continue lowering interest rates when it meets next week. He emphasizes that the Canadian labor market remains fragile, with 33,000 jobs lost in March alone.
This weakness, coupled with potential medium-term effects from U.S. tariffs, raises recession risks. Lin highlights that the estimated probability of a Canadian recession over the next 12 months is at around 65%.
He adds that the BoC will likely be more concerned about the potential for inflation to undershoot its target in the medium term and the overall health of the Canadian economy, than short-term price increases driven by U.S. tariffs.
Going for gold?
Lin concludes with commentary on gold prices, which have recently hit new highs. “Investor anxiety around global economic uncertainty has helped fuel the rally,” he says.
However, he cautions that traditional valuation models suggest gold may be overvalued at current levels. Rather than chasing momentum, he argues investors are better served by sticking to their strategic asset allocation.