This edition of Market Factors takes stock one year after Liberation Day. The economy got dinged by trade sanctions but markets are higher and the first section reviews equity winners and losers. Section two explains how Canada/U.S. trade talks are likely to be delayed by events in the Middle East. After that I talk conspiracy theories – one of my favourite topics – in the diversion section.
EquitiesMarket higher despite ‘visible scars’ from trade
A year out from Liberation Day – the White House tariff imposition party on April 2, 2025 – and not only has the Canadian economy not collapsed, but the TSX is up 30 per cent. There have definitely been winners and losers in the past 12 months but the worst fears have failed to materialize.
BMO chief economist Doug Porter assessed the impact of Liberation Day policy initiatives on domestic growth in his department’s weekly Focus report (U.S. tariffs have had an on-again, off-again trend since the Liberation Day announcements so it’s hard to put firm numbers on the scale).
Mr. Porter grants that the iciness of Canada/U.S. trade negotiations has “left some visible scars” on the economy. Employment growth has been scant and manufacturing output is lower by 4.0 per cent.
The federal trade deficit has climbed from 0.1 per cent of GDP to 1.3 per cent of GDP, or $44-billion, in the past year. The percentage of domestic exports sent to the U.S. fell from an average of 76 per cent in 2024 to 66.4 per cent.
The Canadian economy continues to grow despite these shocks. GDP growth is positive for the first two months of 2026 and the equity market remains resilient.
A look at the top and bottom S&P/TSX Composite performers since Liberation Day offers hints about the equity market’s defiance of trade sanctions.
Precious metals stocks continue to benefit from a flight to safety from global geopolitical upheaval that was in large part caused by U.S. leadership. Discovery Silver Corp, up 374 per cent in simple terms during the past year, is joined by Americas Gold and Silver Corp. (333 per cent) and Abrasilver Resource Corp. (310 per cent) in the top five. Rare metals miner 5N Plus inc. (up 487 per cent) and uranium producer Energy Fuels Inc. (358%) round out the best performer list.
Goeasy Ltd. is the biggest laggard in the TSX over the past year (down 78 per cent) and slower trade might have something to do with the company’s credit issues. Transcontinental Inc. was down 70 per cent after selling its best business division. Constellation Software Inc. (down 49 per cent) got caught up in AI-related fears and executives at Allied Properties REIT (down 44 per cent) are still waiting for work from home to be banned at more companies.
The U.S. Supreme Court limited the president’s power to impose tariffs in February of this year but the White House is now researching loopholes to get around the ruling. The midterm congressional elections this fall are important on many fronts, not least because a subsequent Democratic House of Representatives could further restrain the president.
I’m already starting to consider what happens three years from now when this presidential administration is (hopefully) over. Will the damage to Canada/U.S. trade relations be permanent? We’ll find out then.
Trade‘Painful extension’ for trade talks
Trade negotiations between Canada the U.S. and Mexico will result in a “painful extension” at the July 1 deadline, according to one expert as the misery continues to spread in waves from the White House. Bank of Nova Scotia analysts recently hosted Diego Marroquín Bitar, a fellow at the Americas Program with Center for Strategic and International Studies and the head of the U.S.-Mexico-Canada Agreement Strategic Initiative to a public discussion in Mexico City
Mr. Bitar’s “painful extension” forecast necessitates significant concessions by both Canada and Mexico surrounding stricter Rules of Origin standards, for autos particularly, trade with China and foreign investment screening. A workable renewal of the USMCA agreement is unlikely by the July 1 deadline.
Canada and Mexico are taking opposite approaches to U.S. trade. Mexico is attempting to more deeply integrate themselves into the U.S. economy, aiming to become indispensable. Canadian leadership is working to diversify trade away from dependence on the U.S. market.
Political leadership for both major U.S. political partners are looking to limit Chinese investment in Mexico, particularly in strategic industries like energy and infrastructure.
Negotiations are expected to ramp up this month. The central question concerns how much Canada and Mexico are willing to concede to get a deal done.
Artemis II mission specialist and Canadian Space Agency astronaut Jeremy Hansen shaving inside the Orion spacecraft during Flight Day 5 and ahead of the crew’s lunar flyby on April 6, 2026.Supplied/AFP/Getty Images
Conspiracy theories and me
NASA probably did itself a disservice by launching a mission to moon orbit on April Fool’s Day as the conspiracy-minded must have felt like the space/fraud agency was just rubbing their noses in deception. Personally, I’m not inclined to conspiracy theories but with important exceptions.
It’s not that I deny selfish motivations among the illuminati, it’s more that I don’t believe any group of people larger than two can keep a secret for any length of time. I do believe we’ve been to the moon and I believe Neil deGrasse Tyson when he says there are mirrors (technically they’re laser retroreflectors) on the moon visible with personal telescopes.
I don’t see any way that the hundreds of people that would have been part of a moon landing conspiracy could keep it confidential, nor that the CIA could murder all the credible whistleblowers before they spoke to the press.
The Jeffrey Epstein suicide is a different matter. The collection of coincidences on the day of his death – security cameras stopped working, guards were lackadaisical, and so on – were too big a test of our collective gullibility in my opinion.
In general though, I think Steve Jobs was right when discussing conspiracy theories about poor quality television programming. Addressing the concept that mediocre TV was a conspiratorial effort to dumb down the populace, Mr. Jobs notes the optimism and simplification inherent in conspiracies.
A nefarious plot by TV executives could be thwarted by a revolution to oust them, Mr. Jobs said, and then after that everything’s great. The solution is simple. In a similar sense, those incapable of embracing the complexities of a moon landing can deny it happened and maintain their simpler perspective on the world. In both cases, the conspiracies offered palliative explanations for complicated issues and I have a theory that’s what conspiracies are almost always about.
The essentials
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Globe Investor highlights
Tim Shufelt on how the stock market has a history of missing the shock in plain site
Airline stocks are in a tailspin. Yet, Air Canada is outperforming. David Berman explains why
JPMorgan’s Jamie Dimon thinks interest rates may go higher than the market currently expects
Quick hits
U.S. value factors crushed their growth counterparts during the first quarter, according to BofA Securities quant strategist Savita Subramanian. The Russell 1000 value index’s 2.1 per cent appreciation left the Russell 1000 growth index in the dust by about 12 percentage points. Low EV/EBITDA and low price to cash flow stocks were top performers in March. Perhaps surprisingly, highest quality stocks as measured by credit rating underperformed the lowest credit risk categories. This is likely a function of high quality mega cap tech stocks losing price momentum during the quarter. Momentum stocks fall hard when positive inertia runs out.
I don’t envy oil and gas commodity traders right now. Fundamentals have been thrown out the window more or less, futures prices are tentative at best and the intraday prices are being driven by the incoherent words of the president.
Read this week’s earnings and economic calendar here