On Wednesday, April 2, President Trump, citing a national economic emergency, announced the largest hike in import duties in modern U.S. history - sweeping tariffs of at least 10% on all imports, with significantly higher rates for 60 nations deemed “worst offenders.” Among the most impactful:

• European Union: 20%
• China: 34%
• Japan: 24%

These aggressive measures, aimed at reducing trade deficits, have sent shockwaves through global markets. International leaders are already signalling potential retaliatory actions, raising fears of an escalating trade war. Investors are now grappling with the risk of broad-based economic slowdown, rising inflation, and even stagflation. Markets have reacted swiftly:

• S&P 500: ↓ 4.8%
• S&P/TSX Composite Index: ↓ 3.8%
• Oil Prices: ↓ 7%
• US 10-Year Treasury Yield: -15 bps
• US Dollar Index: -1.6%, one of its worst single-day declines ever

Capstone’s Perspective

The relentless uncertainty surrounding Trump’s trade policies has weighed heavily on both consumer and business confidence. In Canada, the Index of Consumer Confidence has plunged to an all-time low, while US consumer sentiment is at a four-year low.

While predicting Trump’s next move is impossible, two things are evident:

1. Tariffs are a negotiation tool – Many countries will likely push for exemptions or alternative trade agreements, seeking to ease U.S. deficits while limiting economic fallout.
   
2. Trump values market performance – With the S&P 500 now down nearly 10% since his January inauguration, he is undoubtedly aware of the political and economic stakes.

This situation remains highly fluid and unpredictable, and volatility will likely persist. However, at Capstone, we remain committed to strategic, disciplined portfolio management. 

How We Are Positioning Portfolios

• Canadian Equity Income Strategy (CCEIS) – Despite the turbulence, we maintain confidence in companies we believe are fundamentally strong and attractively valued. While sentiment-driven selloffs have pressured valuations, we expect CCEIS’ resilience in downturns to remain intact. That said, we will be watching closely for attractively priced opportunities should they arise.
  
• Traditional & Non-Traditional Equity Pools – These strategies offer broad global diversification, helping to mitigate risks specific to the Canadian market. Additionally, cash reserves are providing some stability amid volatility.
  
• Fixed Income & Mortgage Strategies – The real estate development market in general will be more impacted by the broader economic environment created by the tariffs than it will be by the tariffs themselves.  Early estimates indicate potential cost increases of a relatively subtle ~4%. Conversely, with rising concerns about economic growth, the Bank of Canada may respond by cutting interest rates further this year, which could provide a tailwind for fixed-income investments and mortgage activity.

Our Commitment to You

We are actively tracking developments, and staying informed through industry discussions, research, and market analysis. Our team is continually assessing potential risks and opportunities while maintaining close communication with our external investment managers.

Our core objective remains unchanged: protecting and growing your wealth over the long term. If you have any questions, we encourage you to reach out.

Thank you for your continued trust in Capstone. Have questions about how market changes could impact your portfolio? Connect with us today to speak with an advisor.