On February 19, the S&P 500 hit a record intra-day high of 6147.43. It’s been all downhill since then as U.S. President Donald Trump’s wavering tariffs threats undermine consumer optimism, fears of a recession, and a big dent in corporate profits
How Will Tariffs Impact U.S. Stocks?
The S&P 500 is down roughly 10% since its record February high, putting it in correction territory. For technical traders, the quicker moving 50-day moving average looks as though it’s about to be overtaken by the slower-moving 200-day moving average.
When the 200-day moving average crosses over the 50-day moving average, it forms a “death cross.” That’s a bearish technical indicator that points to additional downsides.
The pessimism comes from concerns on Wall Street that tariffs will cause long-term damage to profits. While the longer-term outlook for corporate profits remains solid, analysts have been cutting their expectations for the next 12 months, with more downgrades than upgrades for 22 of the past 23 weeks. That’s the longest bearish stretch since early 2023.
Stocks need a reason to move higher, and with valuations still in nosebleed territory, S&P 500 companies may need to lower their earnings forecasts. Failing to hit profit and revenue targets could cause their stocks to fall even further. We won’t need to wait long to see how things are doing; the first quarter earnings season begins April 11.
There is evidence that investors are expecting earnings to come in weak and stocks to experience additional downside; gold, which is a safe haven investment, is at record levels. In fact, gold prices are up 17.5% in 2025 and 38% on an annual basis, compared to the S&P 500 which is down 5.6% in 2025 and is up 5.8% on an annual basis. Prices for U.S. government bonds, another safe haven investment, have been on the rise since mid-February.
How Will Tariffs Impact Canadian Stocks?
The TSX, Canada’s main stock index has been doing better than the S&P 500. The TSX hit a record intraday high of 25,875 on January 30. It has experienced some volatility since then but is down just 4% since the late January record. The TSX is also up 0.5% year-to-date and 12% on an annual basis.
One reason why the TSX could continue to do well during a trade war is because of the weakening U.S. dollar. And historically, President Trump prefers a weaker U.S. dollar. Keep in mind, this comes at a time when the Canadian dollar is also weak.
When the U.S. dollar falls investors tend to flock to gold. And the TSX is where a large number of gold companies (explorers, producers, or royalty) list their stocks. These kinds of stocks make up almost 10% of the TSX’s market capitalization. More broadly, 40% of all global mining companies are listed on the TSX and TSXV.
On top of that, a large number of TSX-listed companies are global in nature; just 48% of TSX-generated revenue comes from Canadian operations. This global mix should help juice corporate earnings throughout 2025.
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