I don’t use the news to tactically position my portfolio. By the time you hear it, it’s usually already priced in. But I think it’s valuable for explaining the “why” behind a stock’s move.
If you ever wonder why something is down 4% on a Tuesday, odds are there’s a headline or macro event driving sentiment. With August 2025 now behind us, here are the two big storylines I’m watching into year-end, and my take on where they might go.
Tariffs and trade tensions
The U.S. has already hit Canada with tariffs as high as 35%, and while certain goods under USMCA get partial relief, the tone from Washington points to a more protectionist backdrop. Aluminum and steel prices have been swinging sharply in recent months based on speculation about possible rollbacks or escalations.
My view: despite the bluster, large-scale, long-term tariffs are unlikely to be fully enforced. Historically, these announcements tend to get watered down or selectively applied once the political theatre cools.
But even temporary measures can disrupt supply chains, pressure certain sectors, and inject volatility into commodity prices, especially for Canadian exporters. Expect more headline-driven swings here, but not a collapse in trade activity.
Interest rates: Canada and U.S.
The Bank of Canada (BoC) is holding steady at 2.75% for now, with markets pricing in a likely cut to 2.50% in September and possibly one more before year-end. This is a shift from the rate-hiking cycle of 2022–2023 and signals a softer stance aimed at supporting growth without reigniting inflation.
My call: unless inflation data unexpectedly spikes, the BoC will make both cuts, giving rate-sensitive sectors like real estate investment trusts and utilities a tailwind. That being said, Trump’s tariffs could throw a wrench in this plan.
In the U.S., the Federal Reserve’s policy will continue to set the tone for global markets. Any signs of dovishness from the Fed could boost risk assets, but they’re likely to remain cautious until they see inflation consistently at target.
My expectation is for at least one U.S. rate cut to the tune of 0.25% in late 2025, which could provide an additional lift to equities globally, though the path there will be bumpy.
The Foolish takeaway
Watching trade policy and interest rates is about knowing the context so you don’t overreact when prices swing. I wouldn’t make portfolio changes based on headlines, but being aware of these storylines can help you stay calm and committed to your plan. Keep your focus on your long-term allocations, and let the day-to-day noise fade into the background.
