James Bradshaw of the Globe and Mail reports AIMCo investments gained 12.3% in 2024 but missed benchmark:

Alberta Investment Management Corp. reported a 12.3-per-cent return across its funds in 2024 but fell short of its internal benchmark of 13.8 per cent, capping off a year that ended in turmoil when Alberta’s government dismissed the pension fund manager’s board and CEO.

AIMCo’s balanced fund – which reflects a typical mix of assets for its 17 client funds, which have varying objectives and tolerance for risk – gained 12.6 per cent in the year that ended Dec. 31, falling short of its benchmark of 13.4 per cent.

Over a four-year span, however, AIMCo earned an average of 7.8 per cent annually and added $35-billion to the fund, beating its benchmark over that period by 1.7 percentage points. That raised the fund’s average return over 10 years to 7.4 per cent.

AIMCo invests on behalf of 17 pension, endowment, insurance and government clients in Alberta. Its total assets increased to $179.6-billion, compared with $160.6-billion a year earlier.

The fund’s 2024 performance is the final measure of the three-and-a-half year tenure of former chief executive officer Evan Siddall, who joined AIMCo in 2021 and was working on a multiyear transformation plan for the organization when he was ousted in a sweeping purge last November.

AIMCo’s interim CEO Ray Gilmour, who left a senior civil service post in Alberta’s government in November to help to lead the pension fund manager, said that “with its focus on long-term strategy, the AIMCo team delivered strong results for our clients during 2024,“ in a news release.

“This progress is a testament to the team’s ability to evaluate and seize opportunities, while skillfully navigating the volatile global investment landscape,” Mr. Gilmour said.

AIMCo did not make any senior executive available for an interview on Thursday, and neither Mr. Gilmour nor board chair and former Canadian prime minister Stephen Harper have spoken publicly about their plans for the pension fund since they were appointed late last year.

AIMCo’s strongest gains last year came from its investments in publicly traded stocks, which earned a return of 24.7 per cent. The fund’s global head of public markets, Justin Lord, said 2024 was “another exceptional year for returns from public markets,” in a news release.

The private debt and loan portfolio gained 8.7 per cent, while money market and fixed income funds were up 4.6 per cent.

Infrastructure assets gained 12 per cent and private equity returns followed closely at 11.8 per cent. But AIMCo’s real estate portfolio reported a 2-per-cent loss, facing “difficult market conditions during 2024, particularly in the office sector,” said global head of private equity Peter Teti, in the news release.

When Alberta’s government overhauled AIMCo’s leadership late last year, Finance Minister Nate Horner said the changes were aimed at “restoring confidence” in AIMCo, controlling costs and improving performance.

The pension fund manager’s former interim board chair and other outside pension experts have questioned that rationale, suggesting that AIMCo’s costs and financial performance were consistent with industry standards and often beat internal benchmarks.

In February, AIMCo announced it is closing offices in Singapore and New York little more than a year after it opened them to cut costs, choosing instead to pursue global investment opportunities from its London office.

AIMCo will publish full details of its financial performance, including a breakdown of its 2024 costs, in its annual report in June. Though AIMCo releases details of its investment performance for the calendar year, its fiscal year ends March 31.

Barbara Shecter of the National Post also reports AIMCo posts double-digit return after board and CEO purge:

Alberta Investment Management Corp. (AIMCo), the provincial pension and endowment manager whose board and CEO were purged in November, posted a 12.3 per cent return for the year ended Dec. 31.

The return of AIMCo’s balanced fund, which reduces the impact of portfolios that contain a large amount of fixed income and money market investments, was 12.6 per cent. Like some other large Canadian pensions, AIMCo’s results were slightly below its benchmark return, which incorporated particularly strong equity market returns in 2024.

Total assets under management grew to $179.6 billion from $160.6 billion at the end of 2023.

In November, the Alberta government removed the entire AIMCo board and dismissed chief executive Evan Siddall, who had been at the helm since 2021. Finance Minister Nate Horner said a “reset” was necessary because costs were rising at the fund manager and performance wasn’t keeping up.

A senior bureaucrat was installed as interim CEO and, on Nov.20, former prime minister Stephen Harper was brought on as chair and three of the purged board members returned to AIMCo.

The fund manager’s balanced fund generated a four-year return of 7.8 per cent and a 10-year return of 7.4 per cent, according to figures released Thursday. The total returns for the same periods, which includes the impact of the fixed income-heavy portfolios, were 7.4 per cent and 6.9 per cent.

Last year, AIMCo’s infrastructure and private equity investments posted returns of 12 per cent and 11.8 per cent, respectively, topped only by public equities at 24.7 per cent. The money market and fixed Income portfolio posted a return of 4.6 per cent, while the real estate portfolio, which faced “difficult market conditions,” was down two per cent in 2024.

“With its focus on long-term strategy, the AIMCo team delivered strong results for our clients during 2024,” interim CEO Ray Gilmour said in a statement.

AIMCo operates from offices in Edmonton, Calgary, Toronto, London and Luxembourg. Siddall and his team had opened offices in Singapore and New York to help generate new investments, but those were closed in February in the first major move after the boardroom and executive shakeup last November.

Earlier today, AIMCo issued a press release stating it delivered a 12.6% investment return in 2024:

Edmonton – Alberta Investment Management Corporation (AIMCo) today announced a Balanced Fund net investment return of 12.6%, or $15.1 billion, for the year ended December 31, 2024. This result was approximately 0.8 percentage point below the benchmark return of 13.4%. AIMCo’s annualized long-term results were 7.8% or $35.0 billion over a four-year period, which exceeded the benchmark by approximately 1.7 percentage points. Returns for the ten-year period were 7.4% or $70.4 billion, which was approximately 0.4 percentage point above benchmark.

AIMCo invests on behalf of pension, endowment, insurance, and government clients in Alberta. Each client determines its long-term asset mix according to its objectives and risk profile, which is a key determinant of potential returns along with AIMCo’s execution. AIMCo’s Balanced Fund reflects a typical client mix of investments across all asset classes. AIMCo’s Total Fund return reflects the aggregated results of all client accounts. In 2024, the Total Fund returned 12.3%, which was approximately 1.5 percentage points below its 13.8% benchmark return.

“With its focus on long-term strategy, the AIMCo team delivered strong results for our clients during 2024, with total assets under management reaching $179.6 billion compared to $160.6 billion at the end of 2023,” said Ray Gilmour, Interim Chief Executive Officer, AIMCo. “This progress is a testament to the team’s ability to evaluate and seize opportunities, while skillfully navigating the volatile global investment landscape.”

In 2024, Public Equities generated a significant gain of 24.7%. The Money Market & Fixed Income portfolio achieved a return of 4.6%, and the Mortgages and Private Debt & Loan components of that portfolio had positive returns of 6.4% and 8.7%, respectively.

“2024 proved to be another exceptional year for returns from public markets, particularly in global equities, which was responsible for the majority of this performance,” said Justin Lord, Senior Executive Managing Director, Global Head of Public Markets, AIMCo. “Fixed income returns were positive despite the volatile rate environment, and our high-quality credit exposure contributed to our clients’ portfolios.”

Additionally, AIMCo’s Infrastructure portfolio returned 12.0%, and the Private Equity portfolio generated a return of 11.8%. The Real Estate portfolio was down 2.0% in 2024.

“AIMCo was pleased with the solid performance of our infrastructure and private equity assets, which provide diversification and inflation protection in our clients’ portfolios,” said Peter Teti, AIMCo’s Executive Managing Director, Global Head of Private Equity. “The real estate portfolio continued to be negatively affected by difficult market conditions during 2024, particularly in the office sector.”

Detailed performance information will be available in AIMCo’s 2024 Annual Report, which will be released in June 2025. 

About Alberta Investment Management Corporation (AIMCo)

AIMCo is one of Canada’s largest and most diversified institutional investment managers with more than C$179.6 billion of assets under management as at December 31, 2024. AIMCo invests globally on behalf of pension, endowment, insurance, and government funds in the Province of Alberta. With offices in Edmonton, Calgary, Toronto, London, and Luxembourg, our more than 200 investment professionals bring deep expertise in a range of sectors, geographies, and industries.

Alright, so AIMCo's 2024 results came out and they were strong, 12.3% for the Total Fund and 12.6% for the Balanced Fund.

All the asset classes except for Real Estate (-2%) posted positive gains.

The big gains came from Public Equities (24.7%), Infrastructure (12%) and Private Equity (11.8%). 

Private Debt (8.7%) and Mortgages (6.4%) also posted solid returns.

AIMCo's press release states this:

 This result was approximately 0.8 percentage point below the benchmark return of 13.4%. AIMCo’s annualized long-term results were 7.8% or $35.0 billion over a four-year period, which exceeded the benchmark by approximately 1.7 percentage points.

Every major Canadian pension fund underperformed its benchmark last year so no big surprise.

AIMCo's results aren't a big surprise from one angle because the Fund has a bigger weighting in Public Markets and Public Equities were strong last year:

 

The asset mix above is at the end of December 2023 as the annual report for last year isn't available yet (it will be posted in June).

Not much more to add, all in all I thought these were excellent results and even though Real Estate posted a negative return, it wasn't as bad as I expected and better than most peers.

I do hope that in the future AIMCo also posts benchmark returns for each asset class in this press release (short term and long term performance) just to make it more transparent as now we have to wait for the annual report to see more details at an asset class level.

I didn't reach out to AIMCo for a comment and neither did they reach out to me, seems like they do not want to entertain questions.

With the departure of so many senior investment professionals, it's probably not the right time to discuss results with anyone there.

Obviously these results were solid and to be expected given their asset mix but they do not reflect what's going to happen this year as global equity markets get roiled due to US tariffs. 

On this last point, JPMorgan now says Trump's tariffs are largest US tax hike since 1968 and there's a real risk of a US recession:

U.S. President Donald Trump's cumulative tariff hikes amount to about 22%, which would be equivalent to the biggest U.S. tax increase since 1968, according to a note from JPMorgan.

The bank has raised its risk of global recession to 60%, up from 40% previously, and said the tariff impact could be "magnified by retaliation, supply chain disruptions, and a sentiment shock."

The note cautions that "sustained restrictive trade policies and reduced immigration flows may impose lasting supply costs that will lower U.S. growth over the long run."

JPMorgan adds that these policy actions could evolve in the coming weeks, that "the U.S. and global expansions stand on solid ground and should be able to withstand a modest-sized shock."

If a recession does occur in the US and around the world, equity markets will keep getting hit, it's that simple.

I'm not sure how this latest fallout will evolve but one thing is clear, markets detest policy uncertainty and the longer this goes on, the more downside risks grow.

Let me be blunt, the Trump administration is playing with fire here and it can easily backfire on them.

Below, the CNBC HalfTime Report Investment Committee discusses the Trump tariff fallout and what it means going forward.

Next, Dan Ives, Wedbush, reacts the tech selloff following the latest round of tariff negotiations saying he sees an 'economic armageddon' if these tariffs stay.

Third, Torsten Slok, Apollo Global Management chief economist, joins 'Closing Bell Overtime' to talk the economic impact of recent tariffs and Trump admin policy, stating there's more downside risk ahead.

Fourth, Mandy Xu, Cboe Global Markets head of derivatives markets intelligence, joins 'Fast Money' to talk volatility in the market saying there's no real panic yet and stocks can head lower.

Fifth, Adam Parker, founder and CEO at Trivariate Research, joins CNBC’s 'Closing Bell' to discuss the market sell-off, whether it's the right time to take risks, and more.

Sixth, Brad Gerstner, Altimeter Capital Founder & CEO, joins CNBC’s Halftime Report to discuss Trump’s tariffs, their economic impact, the risk of recession, and more.

Seventh, Yardeni Research president Ed Yardeni joins Market Domination host Josh Lipton and Barron senior market analysis writer Paul La Monica to discuss the current bond yields and the Federal Reserve's cautious approach to rate cuts.

Eighth, Bay street veteran and economist David Rosenberg says Trump's latest tariffs will backfire on the US as he predicts the loss on free trade with major partners will only drain US GDP growth.

Lastly, a clip from AIMCo going over the 2024 results.

Kevin Brueninger of CNBC reports more than 180 countries and territories facing reciprocal tariffs:

President Donald Trump on Wednesday laid out the U.S. “reciprocal tariff” rates that more than 180 countries and territories, including European Union members, will face under his sweeping new trade policy.

Trump and the White House shared a series of charts on social media detailing the tariff rates they say other countries impose on the U.S. Those purported rates include the countries’ “Currency Manipulation and Trade Barriers.”

An adjacent column shows the new U.S. tariff rates on each country, as well as the European Union.

Those rates are, in most cases, roughly half of what the Trump administration claims each country has “charged” the U.S.

The reciprocal rates are not necessarily the only U.S. tariffs these countries will face.

The White House told CNBC’s Eamon Javers on Wednesday that the new reciprocal rate on China will be added to existing tariffs totaling 20%, meaning the true tariff rate on Beijing is 54%.

Trump said his plan will set a 10% baseline tariff across the board. But as his charts make clear, many countries are set to face significantly higher rates.

“We will charge them approximately half of what they are and have been charging us,” Trump said in an announcement in the Rose Garden at the White House.

“So, the tariffs will be not a full reciprocal,” he said.

But that halved figure includes “the combined rate of all their tariffs, nonmonetary barriers and other forms of cheating,” he said.

See all the new rates here:

 

According to NBC News, Treasury Secretary Scott Bessent confirmed to Bloomberg News that goods brought in from China would now be facing an effective tariff rate of 54% — the sum of its newly imposed 34% rate plus the 20% rate Trump had already instituted in his new administration. 

Bessent also shrugged off the market's reaction to the announcement:

Asked if he was concerned by the market moves, Treasury Secretary Scott Bessent told Bloomberg Television that he’s “learned not to look at what goes on during after-hours markets.”

Bessent added that the Nasdaq has a “‘Mag7’ problem, not a MAGA problem,” referring to seven large tech stocks often called the “magnificent 7.”

"I would advise none of the countries to panic," he added.

Global markets reacted sharply and swiftly after President Donald Trump revealed his much-anticipated tariff plans today, with investors fleeing U.S. stock indexes and companies that rely on global supply chains seeing their stocks plummet.

The ETF (exchange-traded fund) that tracks the S&P 500 plunged more than 2.7%. The fund that tracks the tech-heavy Nasdaq 100 slid more than 3.5%, and fund tracking the Dow indicates it would drop more than 415 points at tomorrow’s opening bell.

At this writing, Dow futures have tumbled more than 950 points on fear Trump’s tariffs will spark trade war:

U.S. stock futures cratered as President Donald Trump unveiled sweeping tariffs of at least 10% and even higher for some countries, raising the risks of a global trade war that hits the already sputtering U.S. economy.

Futures tied to the Dow Jones Industrial Average lost 963 points, or 2.3%. S&P 500 futures dropped 3.4%. Nasdaq-100 futures lost 4.2%.

Shares of multinational companies tumbled in extended trading. Nike and Apple each dropped about 7%. Shares of big sellers of imported goods were among the hardest hit. Five Below lost 15%, Dollar Tree tumbled 11% and Gap plunged 8.5%. Tech shares dropped in an overall risk-off mood, with Nvidia off 4.5% and Tesla down 6%.

The White House unveiled a baseline tariff rate of 10% on all countries that goes into effect April 5. Even bigger duties against countries that levy higher rates on the U.S. will be charged in coming days, according to the administration.

“We will charge them approximately half of what they are and have been charging us,” said Trump in a press conference from the White House Rose Garden. “So, the tariffs will be not a full reciprocal.”

That halved figure includes “the combined rate of all their tariffs, non-monetary barriers and other forms of cheating,” he said.

What’s likely spooking traders is that these rates will end up being much higher than expected for many nations. For example, the effective tariff rate for China will now be 54% when accounting for the new reciprocal rate and duties already levied against the country, the White House clarified to CNBC. Traders had hoped a 10%-to-20% rate would be a universally applied cap, not a minimum starting point.

“What was delivered was as haphazard as anything this administration has done to date, and the level of complication on top of the ultimate level of new tariffs is worse than had been feared and not yet priced into the market,” said Art Hogan, chief market strategist at B. Riley Wealth Management.

The S&P 500 rose for a third day Wednesday on hopes Trump would not announce a severe tariff plan on the risk it would tip the economy into a slowdown and raise already sticky inflation.

The benchmark has been hit hard since late February with it falling into correction territory — or 10% down from its record — because of the heightened uncertainty caused by Trump’s ongoing tariff announcements. This uncertainty has started to show up in some sluggish economic data, which further pressured stocks by heightening recession fears.

“If he would have come in with just the 10%, I think the markets would probably be up quite a bit right now,” said Larry Tentarelli, chief technical strategist at the Blue Chip Trend Report. “But because the tariffs came in bigger than many expected, I think what that does is it creates more downside volatility right now.”

Extrapolating the losses in after hours Wednesday trading, the S&P 500 is on course to fall back into a correction during regular hours trading Thursday.

Alright, Liberation Day has finally arrived and Trump finally made his big announcement on tariffs.

How big was today's announcement?

To put today's announcement in perspective, Douglas Irwin, a Dartmouth professor who is a leading expert on the history of economic policy, said on X that Trump's tarrifs are "bigger than Smoot-Hawley":

“This is going to be much bigger than Smoot-Hawley,” @D_A_Irwin says.
“Imports are a much greater share of GDP now than they were back in the early 1930s by a long shot.” Imports of goods & services are 14% of US GDP — ~3x the share they were in 1930. https://t.co/p3tPxhnVxo

— Peterson Institute (@PIIE) April 1, 2025

Thursday and Friday will be interesting days in markets as we get the reaction tariffs tomorrow and the US jobs report on Friday morning.

This clip will go down in history:

At 4:25 PM ET, S&P 500 futures were trading +1.7% higher.

At 4:26 PM ET, Howard Lutnick handed a poster outlining "reciprocal tariffs" to President Trump.

Stock market futures fell REAL-TIME as Trump read off tariffs name by name.

By 4:42 PM… https://t.co/8vehJNDgBn pic.twitter.com/odOkvY5ubD

— The Kobeissi Letter (@KobeissiLetter) April 2, 2025

One thing is for sure, traders will be looking to see how countries react, especially China.

Speaking of China, Arhur Budaghyan, Chief Emerging Markets/ China Strategist at BCA Research posted this on LinkedIn earlier today:

Why is this important? Simply put, if China starts slowing significantly, it could lead to a global recession and they might start exporting deflation again.

We are not there but it's telling that US long bond yields have been declining as markets fear growth disruptions a lot more than inflation effects of tariffs, for now:

But notice above, even though the 10-year US Treasury yield has dropped from 4.75% to 4.2% in the last few weeks, suggesting growth concerns swamp inflation concerns, it's not dropping below 4% precisely because the market fear inflation expectations will pick up in the second half of the year, putting the Fed in a pickle.

Having said this, there's an argument to be made that tariffs are ultimately more deflationary than inflationary if we get a global recession.

What about Canada? It looks like we escaped the worst case scenario but we are by no means out of the woods and we are definitely not immune to a global economic shock.

In our country, there will be winners and losers but we will not escape a recession if a serious trade war develops.

Anyway, the key point to all this is Trump has made his big bold tariff announcement and now we will all wait to see how the world responds.

Below, the BBC reports Donald Trump has announced sweeping tariffs on goods from countries around the world on what he called “Liberation Day”. The US President said it was the start of a "golden age" for America. 

Also, Frank Lavin, former Undersecretary of Commerce for International Trade criticizes Trump's 'scattershot' tariffs strategy for causing contradictory outcomes, hurting the US economy while increasing volatility. As the US becomes a less reliable trading partner, he sees other nations and businesses seeking opportunities elsewhere.

Third, former US Treasury Secretary Lawrence H. Summers says the White House strategy on so-called reciprocal tariffs is "bizarre" and "naive." Summers spoke with Bloomberg's David Westin. When it comes to tariffs, he calls says the strategy is "a remarkable thing that this is the centerpiece of their economic program. And they're so nervous about its market impact that they have to announce it after the markets have closed."

Third, Carlos Gutierrez, former Commerce Secretary, joins 'Fast Money' to talk the economic impact of the recently announced reciprocal tariffs. Very insightful interview, take the time to watch it and listen to his analysis.

Lastly, I guess Trump never saw Ferris Bueller's Day Off. Tariff wars never end well.

Cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP, sometimes called food stamps) are inevitable if Congress and President Trump continue down the budget path they have laid out. Despite President Trump’s claim that he is opposed to cutting Medicaid, he enthusiastically endorsed the budget resolution passed by the House of Representatives in February. The Congressional Budget Office has confirmed that achieving the level of spending reductions specified in this resolution would require cuts to Medicaid (and more cuts on top of that). The House FY 2025 budget resolution calls for, among many other things, an extension of the 2017 Tax Cuts and Jobs Act (TCJA) and requires $2 trillion in spending cuts. To pay for this, the budget resolution has asked House committees that oversee both Medicaid and the SNAP to identify hundreds of billions in potential cuts. The anticipated cuts to both Medicaid and SNAP threaten the economic security of millions of working families.

Medicaid provides health coverage to many low-income households, which include disabled residents, pregnant workers earning low wages, and low-income seniors, all of whom would be greatly harmed by cuts to this program. Workers of color and their families are especially vulnerable to cuts to Medicaid due to structural inequities that cause them to be overrepresented among low-income households. Cutting Medicaid and SNAP and extending the tax cuts from the TCJA would redistribute resources from the bottom of the income distribution towards the top. The bottom fifth of households by income would gain just 0.6% in income on average from the TCJA tax cuts and lose 7.4% from the Medicaid cuts (bringing their net loss to 6.8%), whereas the top 1% of households would see a net gain of 3.9% from these cuts.

Federal cuts to Medicaid follow a long history of political battles over publicly provided health coverage, with major implications for communities of color. The Affordable Care Act and its expansion of Medicaid helped reduce the nonelderly Black and Hispanic uninsured rate by more than 10 percentage points between 2010 and 2023. In fact, both Black and Hispanic individuals under the age of 65 recorded their lowest uninsured rate in 2023, at 9.7% and 17.9%, respectively. Still, many red states where much of the labor force is comprised of poorly paid Black and Hispanic workers have been unwilling to expand access to Medicaid. In 2023, after the end of the Medicaid re-enrollment provision that helped families and children remain insured throughout the pandemic, Black and Hispanic individuals were twice as likely as their white peers to lose coverage. Two years later, Black and Hispanic families stand to experience the brunt of the cuts once again.

People of color are more likely to rely on Medicaid for coverage

While non-Hispanic white individuals account for the largest number of Medicaid beneficiaries, Black and Hispanic individuals are more likely to depend on Medicaid for health coverage. In 2023, nearly a third of Black (29.0%) and Hispanic (29.6%) people relied on Medicaid for health insurance (see Figure A below). These figures amount to more than 13 million Black and more than 19 million Hispanic Medicaid recipients who stand to see a reduction in benefits as a result of Republican efforts in Congress to provide tax cuts that will disproportionately favor the most affluent households in the country at the expense of the most economically vulnerable.

Figure A Children and teens stand to be the most affected by cuts to Medicaid

Children and teens of color stand to be most adversely affected by cuts to Medicaid or the Children’s Health Insurance Program (CHIP). While Medicaid provides health coverage to low-income individuals and families, including individuals with disabilities, CHIP provides free or low-cost coverage to a larger universe of children (under the age of 19) in families that can’t afford private health insurance for routine check-ups, dental visits, and a wide range of other essential services. Like Medicaid, CHIP is jointly financed by the federal government and the states that administer it. Funding for CHIP is tied to Medicaid as states can operate CHIP as a program separate from Medicaid, as an expansion from Medicaid, or a combination of both.

More than half of Black and Hispanic children, and teens under the age of 19, rely on Medicaid or CHIP for health care coverage (see Figure B below). These children are more than twice as likely as their white peers to rely on public health insurance. Potential cuts to Medicaid or CHIP will impact the benefits of more than six million Black and more than 10 million Hispanic children and teens. Medicaid cuts are also likely to cost the federal government more in the long run, as a growing body of research shows that Medicaid coverage for children is a powerful investment in the health and productivity of the future workforce.

Figure B What cuts to Medicaid mean for workers and families of color

When policymakers cut programs designed to help low-income workers, those who cannot work, and their families access health care to fund tax breaks that tilt sharply towards the highest-income households, they are showing disregard for the health and well-being of the vulnerable and deference to the rich.

Black and Hispanic workers are more likely to work in jobs that do not provide access to health insurance, more likely to live and work in environments hazardous to their health, and less likely to have the financial resources to improve their health by buying healthful goods and services. These factors together mean that Black and Hispanic workers are more vulnerable to cuts to Medicaid.

The upshot is this: Cuts to Medicaid will make low-income workers, non-workers, and their families poorer and less able to afford health care, especially those who are Black or Hispanic. An economy that works and grows requires all workers and their families to be able to access the health care they need to show up to their jobs, to school, or for their community. Funding tax cuts for the wealthy by weakening the most vulnerable among us is a poor strategy for both the health of the nation and the economy.

James Thai, co-founder and portfolio manager at Advantage Capital Strategies Group, a Toronto-based sustainable investing firm wrote an op-ed for the Globe and Mail stating in this trade war, pension funds should also buy Canadian:

Recently, during my visits to the local grocery store, I’ve observed a recurring trend: Shoppers picking up a product, peering closely at the label and then putting it back with a frown or wrinkled nose. I can tell what they’re thinking: That’s not made in Canada! I’ll exchange a knowing nod to acknowledge we’re doing our part as consumers to fight back against an economic attack on our country.

Now it’s time for our country’s world-class pension funds to do the same. It is the perfect time to put that American stock back on the shelf and buy Canadian.

This isn’t a new idea. At the beginning of March, 2024, an open letter by executives pushed for our pension funds to invest more in Canada. Across a wide range of industries, business leaders such as Darren Entwistle of Telus, Eric La Flèche of Metro, Laurent Ferreira of National Bank and Alex Pourbaix of Cenovus Energy agreed that the government should take action to encourage pension funds to make this change.

Now there is additional impetus for more domestic investment by pension funds. In essence, this mirrors the support we are providing to local businesses, artisans and farmers. When our pension funds invest in domestic equities, they’re investing in the very companies that employ people in the local economy. When those companies succeed, so does Canada. It’s a virtuous cycle – better stock market valuations allow companies to raise money and compete on the world stage, and success draws in further investment dollars and drives better returns.

Following last year’s open letter, the federal government announced some small steps in its Fall Economic Statement to encourage investment in Canada, including removing restrictions on holding more than 30 per cent of voting shares of Canadian companies, as well as relaxed rules for investing in airport infrastructure. While these policy changes were incrementally positive, the environment has changed dramatically since then and requires more broad and impactful policy action. This is the perfect time to make changes to ride the wave of patriotism sweeping across the country.

We can enable more of this activity by explicitly urging our pension funds to invest locally through a dual objective mandate. The Caisse de dépôt et placement du Québec is a great example of a fund that already does this. In 2004, Quebec passed a bill to amend the Caisse’s mandate to generate optimal returns while at the same time invest in Quebec’s economic development. This reinforces the idea that investment returns and local investment are not competing priorities but rather can support one another.

Many pension funds and observers are resistant to this. Last year, faced with pressure from business leaders for more domestic investment, the response from pension managers such as the Canada Pension Plan Investment Board and Ontario Municipal Employees Retirement System was to hide behind the curtain of fiduciary duty, arguing they need to place returns above all else.

There is merit to that idea, and it made sense at the time. But now we are in a trade war and facing an existential threat. I’d argue that, at its core, fiduciary duty means that Canadian fund managers must act with a duty of care and loyalty to all Canadians. I cannot see how making prudent investments in businesses at home is anything other than an act of loyalty.

Of course, a balanced approach is key. Just as a tasty and nutritious dinner plate needs some foreign spice along with Canadian ingredients, the recipe for long-term investing success is to have a mix of Canadian and international investments.

On average, the eight largest Canadian pension plans with more than $2.3-trillion in assets invest only 25 per cent of their assets in Canada. The largest of them, the Canada Pension Plan, invests only 11 per cent in Canada. This compares with an average of 41 per cent invested in the United States.

If we make just a small adjustment to bring this back in balance over a reasonable period, for example to 33 per cent in each country, that would be a massive investment of $184-billion back into Canada. This would greatly contribute to a stronger and more resilient domestic investment environment.

It’s not about blind patriotism; it’s about sound economic strategy. It’s about recognizing that strong homegrown companies are the best foundation of a robust and independent economy – and to strengthen that, we must buy local.

As I read this opinion piece which sounds very reasonable to informed readers of the Globe and Mail, I once again bow my head in frustration sighing.

I can sum it up like this: We have a crisis, we need to act now, our pension funds must invest more in Canada to save our economy from Trump's tariffs.

Let me let you in on a little secret, all of our large pension funds already invest a lot in Canada, more than they need to, across all asset classes but mostly fixed income, real estate and infrastructure. 

Mr. Thai states on average they invest 25% of their assets in Canada but notes our largest pension fund, CPP Investments, only invests 11% domestically. And this compares to an average 41% in the United States.

He wants our large Canadian pension funds to gradually increase their domestic investments to 33% that would translate to an additional massive investment of $184 billion back into Canada.

What else? He cites CDPQ's success with its dual mandate and an example of how investment returns and economic development can co-exist and thrive.

He admits many large pension funds are resistant to this idea and states the following:

Many pension funds and observers are resistant to this. Last year, faced with pressure from business leaders for more domestic investment, the response from pension managers such as the Canada Pension Plan Investment Board and Ontario Municipal Employees Retirement System was to hide behind the curtain of fiduciary duty, arguing they need to place returns above all else.

There is merit to that idea, and it made sense at the time. But now we are in a trade war and facing an existential threat. I’d argue that, at its core, fiduciary duty means that Canadian fund managers must act with a duty of care and loyalty to all Canadians. I cannot see how making prudent investments in businesses at home is anything other than an act of loyalty.

This really irked me because he obviously doesn't understand the mission and objective of a pension fund, nor does he understand what fiduciary duty is all about.

Again, our pension funds already invest in Canada across all asset classes, public and private.

It has nothing to do with loyalty or patriotism, when it makes sense they will jump on the opportunity to invest at home, foregoing currency and regulatory risk of investing abroad. 

Their fiduciary duty, however, is to make sure they are properly diversified all over the world to withstand a global shock which will knock the Canadian economy down.

Let me repeat that: when there's a global shock, the Canadian economy feels the brunt of it and our equity markets which have a lot of resources tend to go down a lot more than the US market.

And our Canadian loonie declines hard during a global downturn.

We also lack the mega cap tech names in Canada which is good during times when they sell off hard (like now) but bad over the long run because these are the companies of the future.

All this to say, it would be very unwise for our large Canadian pension funds to decrease their exposure to US stocks to invest more in Canadian equities over the long run, and I do stress over the long run.

What else? This isn't the governments' money, it belongs to members and we need to have their full support if governments want to tinker with the way they invest. 

Norway's mammoth sovereign wealth fund invests all of its trillion plus assets outside the country, precisely to diversify its investments over the long run.

True, it invests almost everything in global (and mostly US) equities but it's still diversifying outside its country.

What are the other issues I have with investing more domestically?

A ton. Let's take CDPQ's dual mandate, it's going well now because they got the governance right but some critics argue that "big daddy Caisse" is subsidizing Quebec companies and that leads to them being less productive and less competitive.

I'm not in agreement there but I get the criticism, sort of like Trump's tariffs, it's going to promote less innovation and competition in the US.

And there was a time when CDPQ's Quebec portfolio was in shambles, bribes were rampant, it was the Wild West.

Michael Sabia cleaned that all up and it's on solid footing now but this dual mandate isn't always easy and I can understand why most other large Canadian pension funds aren't on board to implement it.

Having said all this, there's an argument to be made that the success of our large Canadian pension funds can benefit the Canadian economy.

How? Well, take PSP Investments for example, our third largest pension fund which manages the assets of the public service, Canadian Forces, RCMP and the Reserve Force. 

Its former CEO, Neil Cunningham made a persuasive case that the $9-billion from surpluses in public-service pension fund should be invested in a new "Canada Fund" with a similar governance structure as the Canada Growth Fund Inc. (CGF) which PSP Investments manages:

As a follow up to our conversation yesterday it occurred to me that it might to useful for me to differentiate between the Canada Growth Fund (CGF) created a few years ago and my suggested Canada Fund (CF). 
CGF as you know was created by the federal government in 2023 with a mandate to make investments that take on higher risk than what the private sector will invest in to fill the funding gap on innovative investment in Canada that are expected to reduce emissions, preserve Canadian IP in Canada, create long-term employment in Canada and leverage our natural resource assets. It has a venture capital element to it, but the long-term target return of the fund is to break-even - which would be considered a success if the other objectives were achieved. It’s funded by a specific $15 billion commitment by the federal government, its mandate being in line with current federal government objectives, especially on climate. 
The CF in contrast would be funded by the excess returns generated by the PSPF (and potentially the other funds managed by PSP) and therefore would not have any impact on Canada’s annual deficit or national debt. Its mandate would be to invest exclusively in Canada - the mandate and target return to be established but could be similar to the CGF but with a broader range of industry sectors. I would suggest that it have a focus on early to mid-stage Canadian companies that often have to look to the US or elsewhere for the capital required for the development of their IP and to move their business to the next level. 
The similarity of the two funds would be the governance structure wherein the federal government sets the mandate but is NOT in any way involved in the actual investing decisions, both funds to be managed by an independent investment manager. 
By having a long-term funding source that is independent of future government finances, the CF would be a permanent source of capital to promote strategic Canadian private sector investment.

Neil is right that with PSP Investments, the federal government can do whatever it wants with the surpluses.

With our other large pension funds, it's trickier, members and provincial governments have to sign off on what to do with surpluses and they typically increase benefits and I doubt they will want to invest that money in a separate account to bolster the Canadian economy.

Also, I keep stating that all our governments need to create winning conditions to allow our large pension funds to invest large sums in our domestic infrastructure.

I sound like a broken record but that's where pension funds would get the biggest bang for their long duration buck but we are so far behind there compared to the UK, Australia and other countries, it's pathetic.

Lastly, read my last comment on how Canada's $2-trillion pension giants are struggling with Trump's policies.

The inclination is to divest out of the US into Canada but our large pension funds have to resist making impulsive decisions.  

Policy uncertainty isn't a good thing but making rash decisions now can lead to terrible long-term outcomes.

A lot to digest here but it's really important to look at things objectively and realize our large pension funds already invest a lot in Canada and shouldn't be forced to invest more domestically or do anything else that can jeopardize their long-term success.

Below, Mohamed El-Erian, Allianz chief economic advisor and president of Queens' College, Cambridge, joins 'Squawk Box' to discuss President Trump's tariff agenda, impact of reciprocal tariffs, state of the economy, inflation concerns, and more.

Next, Ron Temple, Lazard chief market strategist, joins 'Squawk Box' to discuss the latest market trends, impact of tariff uncertainty, where investors can find opportunities right now, and more.

Third, Mike Wilson, chief US equity strategist at Morgan Stanley, sees the possibility of reciprocal tariffs due this week from President Donald Trump pushing the S&P 500 below 5,500 in the short term, but is “not willing to throw in the towel yet on the full year” target.

Fourth, Julie Biel, Kayne Anderson Rudnick chief market strategist, joins 'The Exchange' to discuss market uncertainty and how to position from here and also mentions a Canadian company that will benefit from trade disruption.

Lastly, Oren Cass, chief economist at American Compass, who writes the “Understanding America” newsletter, sits down with Jon Stewart to discuss conservative economic policies of the New Right, which will be outlined in his forthcoming book, “The New Conservatives.” 

Cass describes a conservative shift from faith in markets, using tariffs as incentives to pursue profit that supports society, how livable wages are the key to a strong economy, and the US’s ideal economic and security alliance that includes balanced trade, owning defense burdens, and keeping China out.

Below, EPI senior economist Elise Gould offers her insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for February. Read the full thread here.

 

The topline numbers in the latest #NumbersDay report on Job Openings and Labor Turnover for February showed little changed in February, but we can see the fingerprints of recent policy decisions on the federal workforce. The data show 18,000 laid off federal workers in February.

[image or embed]

— Elise Gould (@elisegould.bsky.social) April 1, 2025 at 9:23 AM

The spike in the layoffs rate for federal workers in February 2025 is the steepest uptick since the laying off of census takers in 2020. The decision of this administration to target the federal workforce is having its intended effect. Unfortunately, this is likely only the tip of the iceberg.

[image or embed]

— Elise Gould (@elisegould.bsky.social) April 1, 2025 at 9:31 AM

Because the federal workforce is only a small share of the overall workforce—and one that has fallen precipitously as a share since the 1950s—the federal layoffs are not showing up in the economy-wide layoff rate.
www.epi.org/blog/doge-is…

[image or embed]

— Elise Gould (@elisegould.bsky.social) April 1, 2025 at 9:42 AM

Overall, the rate of hires, quits, and layoffs were unchanged between January and February. What we are beginning to see in the federal workforce layoffs along with massive spending cuts has yet to hit the data for the private sector. There’s no question it is coming.
#NumbersDay #EconSky

[image or embed]

— Elise Gould (@elisegould.bsky.social) April 1, 2025 at 9:48 AM

Barbara Shecter of the National Post reports Trump's global shakeup is complicating life for Canada's $2-trillion pension giants:

Ontario Teachers’ Pension Plan Board chief executive Jo Taylor and his investing team usually rely on a lot of real-world data when determining where to allocate billions of dollars of investment money on behalf of retirees. But United States President Donald Trump’s flurry of edicts that threaten to upend global trade and geopolitical alliances makes it hard to know what data points they should even be looking at.

“The predictability of what we’re investing in is lower,” Taylor said as pension teams across the country dig into drafting and assessing potential scenarios for a year that, given the prospect of multiple pockets of economic and geopolitical unrest, could be very different from those that came before it. “Looking forward and trying to predict the future is more challenging.”

Globally invested pensions such as Teachers’, particularly those with large exposure to North America, are acknowledging that investment risks are rising as predictability falls, and the uncertainty is not simply tied to a particular region, sector or asset class like it sometimes is.

Trump exporting risk

The policies and rhetoric of the U.S. administration under Trump — including threats of escalating trade tariffs, threats to annex Greenland, the Panama Canal and Canada, and warnings about withdrawing traditional military support from European allies that don’t meet North Atlantic Treaty Organization (NATO) funding targets — are essentially exporting risk to governments and companies around the world.

This, combined with uncertainty of what he will say from day to day and his ever-changing tariff policies, complicates decision-making at globally invested pensions like the eight largest ones in Canada, which together manage nearly $2.4 trillion to fund the retirements of millions of Canadians.

“It’s hard to predict Mr. Trump,” is the blunt assessment of Charles Emond, chief executive of Caisse de dépôt et placement du Québec.

Pension managers typically assess risk and asset allocation by using models, underpinned by data, to test their portfolios and reveal what would happen against possible and plausible scenarios. Sebastien Betermier, an associate professor of finance at McGill University’s Desautels Faculty of Management, said they then assign probabilities to each outcome.

The problem now is that things are changing very fast — often from one day to the next — and the movements being contemplated by the models are far more extreme and wide-ranging than they have been in the past.

“These scenarios capture regime shifts that are complex and hard to model quantitatively,” Betermier said, adding that pension managers must rely on a certain amount of “narrative building” in the absence of hard facts and figures about how things will play out economically and geopolitically.

What pension professionals can see is that the U.S. equity markets that helped propel returns into the high-single and even low-double-digit returns over the past year or more may no longer reliably do so. Both the benchmark S&P 500 and the Nasdaq composite, often viewed as a stand-in for the tech sector, slid into correction territory in March.

Geopolitical risks rising

There are other less clear yet rising risks pointing to the potential for a global recession, Steven Riddiough, an associate professor of finance at the University of Toronto, said. The escalating trade wars already enveloping North America, Mexico, China, the United Kingdom and Europe threaten to slow growth across the board, he said.

But these conventional sources of risk in economic and market systems do not even paint the full picture for global investing entities, which are vulnerable to an often-overlooked source that can cause major disruptions: geopolitics.

“Countries and firms are seeing their exposure to geopolitical risk change in real time. Many countries — especially in Europe — now feel far more vulnerable as the U.S. creates uncertainty around its explicit and implicit international commitments,” Riddiough said. “In effect, the U.S. is exporting risk to foreign governments and firms through these policy shifts, rapidly altering the risk profile of investors’ portfolios.”

In Trump’s first term as president, he repeatedly said the U.S. might pull out of NATO. Since he took office again in January, he has wielded a different threat by targeting specific nations in the 32-country alliance that don’t pay what he thinks is their fair share of the costs to defend them.

This threat is being acutely felt in Europe, which has relied on the U.S. as the primary guarantor for security since shortly after the Second World War, as have many other countries. The position taken by Trump and the White House on NATO-hopeful Ukraine, including a public confrontation with President Volodymyr Zelenskyy that suggested the U.S. may no longer help push back on Russia’s invasion, sent fears through nearby NATO member countries such as Poland and raised questions about whether an attack on one NATO member will continue to be viewed by the U.S. as an attack on them all.

Such challenges to nearly 80-year-old international understandings — not to mention Canada suddenly being declared by Trump to be an enemy rather than a partner in trade — are forcing pension managers to undertake far more complex reviews than usual and face tough decisions across a number of portfolios.

The situation is also challenging a key element of what has made large, globally invested pensions such as Canada’s so-called Maple 8 group so successful: diversification. By spreading investments, from equities to infrastructure, across public and private assets and buying in a variety of countries, they reduce the downside risk of something going wrong with a particular asset class or in a particular country or region.

However, with geopolitical upheaval spreading across jurisdictions and threatening to penalize multiple sectors and asset classes, there could be widespread repricing of risk, which would send investors fleeing to safer assets in what’s known as a “risk-off” scenario.

“In extreme risk-off scenarios, it’s like everyone rushing for the exits in a burning theatre,” said Riddiough, whose resumé includes a consulting stint with the Canada Pension Plan Investment Board on global tactical asset allocation.

“In those moments, assets that normally move independently start selling off in unison. In the most extreme case, if everything sells off in exactly the same way, then it doesn’t really matter how many assets you hold; it’s as if you only own one.”

Canadian pension managers have increased investments in private assets over the past decade or more in part to avoid getting caught in such scenarios. Because assets such as real estate, private equity and infrastructure don’t trade frequently or in as volatile a manner as public markets, they can preserve value — and mask elevated risk — even when public markets plummet.

However, new approaches to valuing private assets are threatening to close this gap, which can also make these less liquid assets difficult to exit in times of crisis due to large gaps between what sellers and buyers think the assets are worth — as happened with commercial real estate after the COVID-19 pandemic spurred a surge in remote work and office building vacancies skyrocketed.

“It’s increasingly difficult to hide the elevated risk by overweighting private markets because many firms are building tools, using data and AI, to quantify private market risk in real time,” said Kenneth Kroner, an economist and finance professional who spent two decades at investment company BlackRock Inc., where he oversaw multi-asset strategies and systemic active equities as a senior managing director and member of the global executive committee.

“In a few years, the true risk of private investing will be quantified and well-understood. In the meantime, I think most sophisticated boards … aren’t fooled one bit,” he said. “If I were a portfolio manager (at one of Canada’s big pensions), I’d emphasize to my board (and) clients that risk is elevated even though the data might not currently say so.”

Still, the Edmonton-born Kroner, who was a director at Alberta Investment Management Corp. (AIMCo) for seven years until a government-led shakeup resulted in his departure along with the rest of the board last year, said he doesn’t think Canadian pensions should be making any sudden moves in the way they invest in response to Trump.

Pension managers should focus on their advantage, which is long-term investing. Today, that’s clearer than at any time in my career

Kenneth Kroner, economist and finance professional

Instead, he said, they should be scrutinizing everything that is happening and modelling what the consequences are likely to be in order to focus on what will survive in the years well beyond his presidency and invest based on that.

“I would study and understand those risks now,” he said. “But I wouldn’t invest for those risks until I believe that they’ll be a reality in 10 years’ time.”

Long-term view

For example, pension professionals should be asking themselves what trade policy will look like in a decade, rather than simply looking at what Trump is proposing now, Kroner said. Another key question is where innovation will be strongest at that point, if not the U.S. There is also the question of how shifting alliances today are likely to alter geopolitical order beyond the lifetimes of current country leaders.

Some will try to profit from the “noise” around Trump, including his shifting rhetoric on tariffs and threats to bring economic harm to Canada to get what he wants on issues including trade and NATO funding, but he said he would not advise pensions to try to pick short-term winners and losers.

“The noise level is just too high to make informed bets along these lines; leave those bets to naive investors,” he said, adding that the investment horizon of pension funds gives their managers the option to set a different course. “Pension managers should focus on their advantage, which is long-term investing. Today, that’s clearer than at any time in my career.”

This means closely scrutinizing the impact of the fast-shifting geopolitical order, which has the potential to crimp growth and long-term returns.

“The (traditional) U.S. axis has the potential to split into two further axes: those aligned with the U.S. and those not,” he said. 

The isolationist path of the U.S. is raising questions about whether economic growth can continue at the clip that has been helping pension returns over the last decade or more. Even the U.S. Federal Reserve reduced its outlook for gross domestic product (GDP) growth to 1.7 per cent from 2.1 per cent, while inflation is forecast to grow and interest rate cuts could be off the table this year.

After Teachers’ turned in an annual return of 9.4 per cent for 2024, Taylor said his team had begun to assess whether the U.S. can continue to provide the fund with the same level of risk-adjusted returns to justify adding to the $99 billion invested there.

“The question is, how much more do we want to build on top of that versus other parts of the world?” he said.

Kroner said portfolio managers considering how to play the evolving situation should move away from investing in traditional global indexes such as MSCI World and All Country World indexes, which provide exposure to a broad basket of large and mid-cap stocks in developed countries and emerging markets, and instead create new indexes that reflect the shifts and splintering of alliances and trade.

He said pensions should also focus on higher-growth segments of the market that prioritize innovation.

“To overcome the growth deficit, one should invest heavily in markets where innovation is best supported,” he said. “Arguably, that’s what we’ve done for decades, but that might no longer be the U.S., like it has been historically.”

Kroner said pension managers should be the repricing the risk of investing in Europe, particularly countries in the NATO alliance.

“No matter how you slice it, the risk of investing in NATO countries is elevated and will remain so for a few years,” he said.

In one scenario, pension managers could reprice the risk of NATO countries as a whole, taking the view that Trump’s stance will affect them all negatively. In another, the risk for investments in counties most likely to feel threats from Russia if U.S. support wanes, such as Poland, could be repriced.

In either scenario, Kroner said, assets should be reallocated to countries outside NATO based on the changing risk-reward calculus.

“The risk is a broad geopolitical risk,” he said, adding that he favours the first scenario. “The alternative is to go through all the NATO countries and come up with a personal view of the Trump impact on each individual country, and that’d be a challenging exercise to get right.”

Homegrown challenges

Some “homeshoring” — reallocating investment to a pension fund’s home market — is an obvious strategy, he said, though this is potentially a difficult one for large Canadian pension funds whose managers have complained for years that large, private infrastructure investments — from toll roads to airports — aren’t made available to them.

They have also pushed back on pressure to invest more in Canadian companies via stock markets due to concerns it would lead to overconcentration in their home market and a reduction in long-term returns generated through diversification.

After Teachers’ reported its latest annual results in March, Taylor reiterated the former.

“We’ve stated for a while that we have a strong desire to try to invest more in Canada in larger assets,” he said.

Another alternative would be for the pension giants to shift investments away from NATO countries to similar economies, such as Latin America and Asia, Kroner said.

“What I would do is move some percentage away from NATO (countries), say, five per cent,” he said. “Half of that would come home and half would go to a LatAm index and an Asia index.”

Within Asia, China presents its own risks for pension managers, though growth is not the primary concern.

“Investments in the China axis are extremely risky because of the very high risk that they become stranded assets,” Kroner said. “I’d recommend that institutional investors either avoid investing in this axis, or at least keep their allocations to something less than cap-weight” — a less risky way to invest in a basket of assets in an index.

The Canada Pension Plan Investment Board has significant investments in China, but its exposure, once representing more than 10 per cent of assets, has been declining since 2021 and the fund has committed resources and attention to other countries in the Asia-Pacific region.

Teachers’ and others in the Maple 8, including the Caisse and British Columbia Investment Management Corp., paused direct investments in China in 2023 and Teachers’ plans to close its Hong Kong office this year while targeting a doubling of investments in India over the next five years.

Concerns about China came to the fore a couple of years ago amid government and regulatory crackdowns on tech businesses, but the world was still more or less perceived to be under the steady hand of the U.S.

With that in the rearview mirror, Kroner said institutional investors should be preparing for some pretty bad outcomes, including wars.

“But,” he said, “nothing has changed on this front since Trump, in that investors should always prepare for bad outcomes” through good risk management and scenario analysis that look at what could happen to a portfolio in very bad scenarios.

“The only difference this time is that Trump has made some of these negative scenarios pretty easy to envision,” he said.

As Wall Street closes out its worst quarter since 2022, every large fund (not just pension funds) is trying the navigate the noise from Trump's tariffs.

It's a big problem and while the inclination is to shift away from the US to domestic or ex-US assets, I do agree with Kenneth Kroner, AIMCo's former Chair (featured above), it would be wise to resist making impulsive decisions based on the latest news.

The truth is nobody knows where Trump is headed with these tariffs.

Moreover, I have my doubts that his own administration knows. 

All I know is Trump 2.0 is off to a terrible start and if it's one thing you need to remember about Trump is he's incredible vain and will likely fold on tariffs when the going gets tough.

In that  regard, he's highly predictable.

In fact, last week, when he caught wind that Canada and the EU were coordinating a response, he showed his cards by panicking and stating the will significantly increase tariffs if that were the case.

That is telling but it shows you Trump doesn't really want to start a tariff war.

The good news is by the end of the week, we will know where his administration stands on tariffs.

The bad news is they might go through with these tariffs in the near term as a form of negotiation and that will wreak havoc on global markets and possibly send the global economy including the US into a recession.

More bad news might also come in the form of US economic data that confirms a recession has arrived.

This week we get the ISM tomorrow and then the big jobs report on Friday.

Thus far, the market is in RISK OFF mode and rates are creeping higher as investors price in stagflation.

I don't get carried away with short-term movements but it's clear growth and hyper growth stocks are bearing the brunt of this policy uncertainty.

Still, I noticed stocks came back strong today, especially growth stocks which were selling off hard at the open.

This tells me the market is sniffing out lenient tariffs but we are also closing out a bad quarter, portfolio rebalancing is helping cushion the blow and adds to volatility.

Whatever happens the rest of the year is anyone's guess.

Will stagflation prevail? Are we headed to a long tariff war which causes a global economic recession?

Again, nobody really knows, all long-term investors can do is diversify and be ready to seize opportunities as they present themselves. 

Below,Scott Wren, Wells Fargo Investment Institute Senior Global Market Strategist, and Victoria Greene, G Squared Private Wealth CIO, joins 'Closing Bell Overtime' to talk the impact of tariffs on the market.

Next, Doug Rediker, founder and managing partner of International Capital Strategies, says the Trump tariff plan is fraught with uncertainty and Wednesday's announcement likely will bring only some clarity.

Third, Chris Verrone, Strategas Research Partners chief market strategist, joins 'Closing Bell' to discuss markets, making sense of the sector rotation and more.

Lastly, Joseph LaVorgna, SMBC Nikko Securities America chief economist and former Trump Economic advisor, and Mark Zandi, Moody’s Analytics chief economist, joins 'Closing Bell Overtime' to talk the impact of tariffs on the economy.

Pia Signh and Sarah Min of CNBC report Wall Street sell-off deepens on inflation worries, Dow closes 700 points lower:

Stocks sold off sharply on Friday, pressured by growing uncertainty on U.S. trade policy as well as a more grim outlook on inflation.

The Dow Jones Industrial Average closed down 715.80 points, or 1.69%, at 41,583.90. The S&P 500 shed 1.97% to 5,580.94, ending the week down for the fifth time in the last six weeks. The Nasdaq Composite plunged 2.7% to settle at 17,322.99.

Shares of several technology giants dropped, putting pressure on the broader market. Google-parent Alphabet lost 4.9%, while Meta and Amazon each shed 4.3%.

This week, the S&P 500 lost 1.53%, while the 30-stock Dow shed 0.96%. The Nasdaq declined by 2.59%. With this latest losing week, Nasdaq is now on pace for a more than 8% monthly decline, which would be its worst monthly performance since December 2022.

Stocks took a leg lower on Friday after the University of Michigan’s final read on consumer sentiment for March reflected the highest long-term inflation expectations since 1993.

Friday’s core personal consumption expenditures price index also came out hotter-than-expected, rising 2.8% in February and reflecting a 0.4% increase for the month, stoking concerns about persistent inflation. Economists surveyed by Dow Jones had been looking for respective numbers of 2.7% and 0.3%. Consumer spending accelerated 0.4% for the month, below the 0.5% forecast, according to fresh data from the Bureau of Economic Analysis.

“The market is getting squeezed by both sides. There is uncertainty around next week’s reciprocal tariffs hitting the major exporting sectors like tech alongside concerns about a weakening consumer facing higher prices hitting areas like discretionary,” said Scott Helfstein, head of investment strategy at Global X.

Helfstein added, however, that the news on inflation and consumer spending “was not that bad” and could simply represent a hiccup in near-term sentiment as investors struggle to understand the Trump administration’s new policies.

“Despite today’s sell-off and broader market volatility of the past few weeks, there have not been big inflows into money markets. It seems like a lot of investors are trying to ride this out,” he said.

The latest inflation report comes amid a flurry of tariff announcements from the White House, which have roiled the market in recent weeks. Investors are looking ahead to April 2, when President Donald Trump is expected to announce further tariff plans, for further clarity.

On Friday, Canadian Prime Minister Mark Carney told Trump that the Canadian government will implement retaliatory tariffs following Wednesday’s announcements. Bloomberg earlier reported that the European Union is identifying concessions it could make to Trump’s administration to reduce the reciprocal tariffs from the U.S.

Trump earlier this week announced a 25% tariff on “all cars that are not made in the United States,” a decision that hurt auto stocks and raised concerns of an economic slowdown.

Jennifer Shonberger of Yahoo Finance also reports the Fed’s inflation dilemma just got more challenging as Trump's new tariffs loom:

The Federal Reserve’s preferred inflation gauge showed prices in February rose more than expected, re-intensifying the central bank’s inflation battle at a time when it expects new tariffs from the Trump administration to push prices higher.

The new reading makes it more likely that officials hold rates at current levels for longer as policymakers look for signs of how President Trump's policies will affect the US economy in the months ahead.

"It looks like a 'wait-and-see' Fed still has more waiting to do," said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

"Today’s higher-than-expected inflation reading wasn’t exceptionally hot, but it isn’t going to speed up the Fed’s timeline for cutting interest rates, especially given the uncertainty surrounding tariffs."

Fed Chair Jerome Powell has said that his "base case" is that any extra inflation from Trump's slate of tariffs will be "transitory." But some of his colleagues worry the effects could be more persistent, adding to the uncertainties ahead for the central bank.

The Fed's goal is to get inflation down to its 2% target, but the key measure released Friday remains well above that marker. The "core" Personal Consumption Expenditures (PCE) Index, which excludes volatile food and energy prices, rose 2.8% year-over-year.

That reading was higher than economists' estimate of 2.7%, jumping from 2.6% in January. The month-over-month reading was also hotter, clocking in at 0.4%. That was higher than the 0.3% expected and up from that same level in the previous month.

Inflation now stands at the level the Fed predicted it would be at year's end — and that's before some of Trump's most aggressive tariff plans kick in. The president plans to announce a sweeping set of "reciprocal" country-by-country duties next week.

Fed officials raised their 2025 inflation forecast at a meeting last week, to 2.8% from 2.5% previously, due in large part to uncertainty surrounding the new tariffs. They also lowered their economic growth forecasts for the year.

But February’s inflation report now shows that even the Fed’s revised inflation forecast may prove to be too conservative.

'Transitory' — or not?

Traders are still pricing in an interest rate cut in June with the potential for another cut in the fall. And the two-cut prediction from Wall Street still matches what Fed officials estimated at their meeting last week where they held rates unchanged.

Some Fed watchers, however, argue that these rate cut predictions could be challenged, too.

The new PCE reading "reinforces our view that the Fed is unlikely to cut interest rates this year," said Stephen Brown, deputy chief North America economist for Capital Economics.

The critical question ahead for Fed policymakers is how much of any additional inflation they expect to see is a one-off effect that will prove to be temporary.

While Powell has argued in favor of a potential "transitory" effect, some of his colleagues have offered more caution.

Boston Fed president Susan Collins said Thursday while speaking in Boston that she believes it’s “inevitable that tariffs are going to increase inflation in the near term” and she expects the uptick in inflation could be short-lived.

But she added, “there are risks around that and depending on how that unfolds, it could be more persistent.”

Collins stressed that if there are additional rounds of tariffs, they are more broad-based, or if there are different levels of retaliation, then inflation could be more persistent than just a relatively fast adjustment to a higher level of prices.

In that context she said she would be looking more closely at inflation expectations because anchoring expectations is important for the Fed’s credibility to bring inflation back down.

St. Louis Fed president Alberto Musalem also said this week that he could be "wary of assuming that the impact of tariff increases on inflation will be entirely temporary, or that a full 'look-through' strategy will necessarily be appropriate."

He noted that tariffs could create a one-time increase in price-levels, but that so-called "indirect effects" where domestic producers raise prices as importers raise prices could cause inflation to be more long lasting.

Musalem offered the example of beer from Canada. If it is subject to a 25% tariff, US consumers could shift from Canadian beer to American-made Budweiser, and then Budweiser could increase its prices as people look for locally produced goods.

"Distinguishing, especially in real-time, between direct, indirect, and second-round effects entails considerable uncertainty," he added.

It's been a tough week for markets as tariffs and inflation fears loom large.

On inflation, tariffs or no tariffs, it remains the big wildcard for the second half of the year.

Obviously, I agree with those who think tariffs will not lead to "transitoty inflation," that's pure nonsense especially if a full-blown tariff war breaks out.

But I remain unconvinced that Trump really wants a tariff war and this week we got a sense of why when he threatened higher tariffs on Canada and the EU if they combine forces to slap tariffs on the US.

That just tells me that Trump is very worried about that possibility and he's just using tariffs to negotiate.

However, he made a huge mistake slapping a 25% tariff on all foreign cars, not realizing how intertwined the supply chains are between Canada and the US, not to mention many Japanese, German and Korean automakers have invested billions in US plants and make cars there.

It's a complete and utter mess and now that "Liberation Day" is right around the corner, many are bracing for chaos, including US ports.   

Again, I don't think Trump really wants a full-blown tariff war with other nations risking to plunge the US and world into a recession but I could be wrong.

A global recession will mean growth fears will dominate inflation fears, yields will plunge.

If however we manage to get past this tariff tantrum, growth moderates but inflation persists, then that will wreak havoc as rates will remain elevated, the Fed  will not cut and stagflation will develop.

Stagflation could develop with tariffs too but I see more of a growth risk there, meaning unemployment will soar and inflation will be capped.

Either way, the way stocks are trading, it's clear big investors are worried about persistent inflation and a recession.

Growth stocks are bearing the brunt of the selloff in Q1:

 As shown above, Energy stocks (+8%) lead the S&P year-to-date followed by Healthcare (+5%) and Utilities (+3%).

And if you look at the best and worst large cap stock year-to-date, you see a clearer picture of what is going on, especially looking at the worst performing large cap stocks so far this year:

 

But the focus remains on Mag-7 stocks, all of which are struggling.

Look at the charts below of Nvidia, Microsoft, Google and Meta for this month:

Nvidia shares are retesting their low from earlier this month, Microsoft shares are making a new 52-week low, Google and Meta shares are sliding lower.

I can tell you it's pretty much the same for Amazon and Apple and we all know what's going on in Tesla shares this year.

The way mega cap and hyper growth stocks are selling off this past quarter, it's a huge re-rating based on expectations of higher rates.

Is this another golden buying opportunity or the start of a long and painful bear market where big tech shares lead the market lower?

I can't answer that just yet, I need one more quarter to figure out if inflation expectations are picking up.

Below, Tom Lee, Fundstrat, joins 'Closing Bell Overtime' to talk the state of the markets and the impact of tariffs.

Also, Bob Elliott, Unlimited CEO, and Richard Bernstein, Richard Bernstein Advisors CEO, join 'Closing Bell Overtime' to talk the days market selloff.

Lastly, 'Fast Money' traders react to the day's market selloff. 

Next week is a big week, tariffs, ISM and jobs data all coming up.

Between 2020 and 2024, South Carolina’s job growth meaningfully outpaced job growth nationally. Our recent report analyzes the state’s economic boom in recent years, fueled in part by federal investments in the Bipartisan Infrastructure Law and the Inflation Reduction Act. A key industry in the state is manufacturing, especially tires, auto, and auto parts manufacturing. South Carolina’s political leaders boast that the state leads the nation in the export of tires and completed passenger vehicles.

Even before federal investments spurred the state’s manufacturing growth, lawmakers were using generous economic development subsidies to lure manufacturing to South Carolina. While the state’s approach has created jobs, the quality of those jobs and the overall benefit to South Carolina communities—at substantial public cost—remains dubious.

Chester County, South Carolina, is a prime example. Between 2014 and 2023, growth in manufacturing jobs in Chester County vastly exceeded that of South Carolina as a whole—43.7% compared with 14.3%.1 As a result of successful efforts to attract corporations to Chester County, it is home to more than 50 manufacturers across industrial sectors, including Giti Tire, a Singapore-based tire manufacturing company featured on the Chester County Economic Development website.

Despite the rapid growth in manufacturing in Chester County, its residents, particularly the ones living in the city of Chester, are seeing limited benefits from that growth, despite generous subsidies to manufacturers for locating in Chester County. Giti Tire, for example, received over $35 million from the Coordinating Council for Economic Development’s Rural Infrastructure Fund as well as $12 million in local tax breaks between 2018 and 2022, with at least $4 million more per year expected at least through 2026. The company promised to create 1,700 jobs. Their website indicates they began production in 2017 and surpassed one million tires in 2018. Yet their Chester plant employs between roughly 600 to more than 900 workers, with the most optimistic number being just over one-half of the promised number of jobs.

This highlights one of the many problems with economic development subsidies: They frequently lack any penalties for subsidized companies that fail to meet their promises. Further, many subsidies that go to corporations are not coupled with requirements that local communities benefit. Rather, many subsidies simply divert tax dollars away from investments in local schools, public roads, and health care. This has been particularly problematic in Chester, which faces some of the largest losses of public school funding to tax abatements, losses which have increased in almost every year since 2017 with the exception of 2020 when it remained roughly stable.

Workers and families in Chester recognize that the benefits major corporations receive for locating in their communities go far beyond just subsidies. Chester provides manufacturers with broad access to varied transport options for importing raw materials and exporting finished goods including by railroad, port, and major highway networks. Auto and tire manufacturing particularly benefit from their proximity to other auto and auto parts manufacturers and related supply chains supporting these manufacturers.

Of course, the region’s greatest asset is an available workforce, ready to work if given access to quality jobs. Chester is an area that has long been neglected by state lawmakers and whose residents have been exploited by corporations historically and continue to be exploited today, including by large multinationals like Giti Tire.

For decades, lawmakers in South Carolina have embraced an economic development strategy common in the South, centered on disempowering workers and communities, keeping wages and benefits low, and limiting worker protections. South Carolina is one of just five states in the country that does not have a state minimum wage.2 It is one of two-dozen states with a so-called right-to-work law, which guarantees neither workers’ rights nor a job. Instead, these laws make it more difficult for workers to build and sustain a union, one of the most effective avenues for workers to collectively demand a living wage, safe workplaces, and basic benefits such as health insurance and paid sick days.

As we illustrate in our recent report, these policies and the state’s history of strong opposition to multiracial worker solidarity have left South Carolina with the lowest union coverage rate of any state in 2023, and the third lowest rate in 2024.

These factors are compounded by a range of labor market disadvantages faced by Chester residents. Table 1 shows both Chester County (35.8% Black) and the city of Chester (64.3%) are disproportionately Black compared with their counterparts nationally (12%) or statewide (25.1%). Just 8.4% of those in Chester County and 10.5% of those in the city of Chester hold a bachelor’s degree, roughly half the national (21.3%) or state-wide (19.4%) rate. Chester residents are also about twice as like to fall below the poverty line—19.3% of Chester County, 25% of the city of Chester, compared with 12.4% of Americans nationally and 14.2% of all South Carolinians.

Table 1

The higher poverty rates shown in Table 1 reflect to some degree low median wages. Median earnings in Chester County ($44,908) and the city of Chester ($38,687) are just 74.7% and 64.4%, respectively, of the earnings of workers nationally ($60,096).

Workers in the Giti plant report that instead of hiring the promised number of workers, the company forces them to work mandatory overtime, in unsafe working conditions, and segregated by gender. Occupational sex segregation is a key factor in women’s lower pay relative to their male counterparts, and earnings data for manufacturing workers in Chester are consistent with this finding. The data show that in the city of Chester, women are paid just 57.1 cents for every dollar paid to male workers. Nationally, women in manufacturing are paid 77.5 cents for each dollar paid to men.

Investments in South Carolina need to benefit South Carolina communities. Lawmakers should not be raiding public funds for schools, roads, and hospitals to give subsidies to large corporations, and businesses being welcomed into communities like Chester should be creating good jobs for local residents. In Chester, and across the state, workers are coming together to demand higher wages and better working conditions, and they are supported by their communities, faith leaders, and unions. Employers and lawmakers should listen.

1. Author’s calculation of Bureau of Labor Statistics Quarterly Census of Employment and Wages (QCEW) data.

2. In states that lack a state minimum wage, as in South Carolina, the federal minimum wage of $7.25 per hour applies.