Bay Street in Toronto’s financial district is captured in a photo taken on Wednesday, March 18, 2020. (The Canadian Press/Nathan Denette)
Canada’s stock market took a hit on Tuesday, weighed down by losses in the technology and industrial sectors. U.S. markets followed suit, with the Nasdaq plunging 1.7%, marking a sharp reversal after two days of gains. Investors are grappling with market swings driven by ongoing trade tensions and inflation concerns.
Stock Indexes Slide After Gains
The S&P/TSX composite index fell 79.04 points, closing at 24,706.07. South of the border, Wall Street also had a rough day. The Dow Jones Industrial Average dropped 260.32 points to 41,581.31, while the S&P 500 lost 60.46 points, ending at 5,614.66. The Nasdaq took the hardest hit, shedding 304.55 points to settle at 17,504.12.
Investors Shift from Tech to Value Stocks
With markets experiencing daily fluctuations, investors are changing strategies. Many are shifting away from high-growth tech stocks and moving toward more stable value stocks, says Kevin Burkett, a portfolio manager at Burkett Asset Management in Victoria.
Inflation Heats Up, Adding to Uncertainty
Fresh inflation data out of Canada fueled market worries. Prices rose faster than expected last month, pushing the annual inflation rate to 2.6%. Both headline and core inflation numbers exceeded predictions, raising questions about the Bank of Canada’s next move.
Earlier this month, the central bank cut its key interest rate. However, Burkett warns that the latest inflation spike complicates future decisions, particularly with potential tariff impacts looming. “What they choose to do next is now far more uncertain,” he said.
Trade War Could Stall Economic Progress
Rising tariffs are likely to push inflation even higher while dragging down economic growth. Burkett noted that Canada was nearing the end of a prolonged battle with inflation, but trade tensions are now disrupting that progress.
Consumers are feeling the strain too. Concerns about wages, job security, and economic stability are growing, he added. “People are worried about their incomes and the labour market. That anxiety will soon be reflected in economic data.”
Fed Decision in Focus
Attention now turns to the U.S. Federal Reserve, which is set to announce its latest interest rate decision on Wednesday. A rate cut is highly unlikely, Burkett said, but investors will be watching Fed Chair Jerome Powell closely for insights on trade policies and economic outlook. Powell, however, is expected to tread carefully in his remarks.
Currency and Commodity Updates
The Canadian dollar saw little movement, trading at 69.93 cents US, up slightly from 69.91 cents US on Monday.
In commodities, crude oil prices dipped 62 cents to US$66.75 per barrel, while natural gas inched up three cents to US$4.05 per MMBtu. Gold surged US$34.70 to US$3,040.80 an ounce, and copper climbed six cents to US$5.02 per pound.
