Markets are experiencing a period of recovery after a turbulent spring marked by President Trump’s sweeping tariffs on Canada, Mexico, and China that sent shockwaves through global markets. The S&P 500 and TSX indexes have managed to reclaim approximately half of their losses as inflation trends down and central banks, including the Bank of Canada, lower their policy rates to stimulate growth.
However, with ongoing trade tensions and softening earnings forecasts, investors find themselves in a quandary: should they reinvest now or wait for another market dip?
The S&P 500 hit bear market territory in early April, characterized by a 20% decline from its previous peak. The index fell to 4,870, marking a 21% drop from its high of 6,144 on February 19, 2025. This was the second-fastest slide into a bear market in history, only trailing the swift downturn seen during the COVID-19 pandemic in March 2020.
Despite this volatility, analysts are now labeling the sell-off as a transient correction rather than a long-term downturn. The market’s resurgence has been attributed to easing inflation, optimistic sentiments regarding potential interest rate cuts, and renewed consumer spending. Nevertheless, geopolitical risks, particularly connected to ongoing tariff negotiations, continue to weigh heavily on investor sentiment.
On April 2, 2025, President Trump introduced comprehensive tariffs, including a 25% duty on imports from Canada and Mexico, alongside an increase in tariffs on Chinese goods from 10% to 20%. Such measures have sparked fears of a global trade war, contributing significantly to market instability. Even though Trump has engaged in negotiations throughout 2025, his persistent use of tariffs creates uncertainty for investors. However, many economists anticipate that a partial rollback of U.S./Canada trade measures may occur by early 2026 as discussions progress. The initial imposition of the 25% duty elevated input costs in the second quarter, but many firms have since adjusted their supply chains and pricing strategies.
One silver lining amidst this turmoil is that more extreme recession scenarios have not come to fruition. GDP growth for both the U.S. and Canada appears stable, hovering between 1.5% and 2%, indicating that much of the tariff-induced risk may already be reflected in current market valuations.
As uncertainty persists, both current and prospective investors are evaluating whether this is the right moment to dive back into equities. Historically, downturns have often provided fertile ground for long-term investors. According to Bespoke Investment Group, the average bear market since 1929 has lasted 286 days, while bull markets have typically extended for 1,011 days. This historical trend suggests that even amidst temporary declines, markets often rebound and expand over more extended periods.
Despite ongoing volatility, decreased valuations and potential interest rate cuts have unveiled investment opportunities, particularly in sectors such as technology, financials, and industrials. Long-term investors are urged to concentrate on fundamentally solid businesses with resilient earnings rather than being swayed by short-term market fluctuations. To locate promising investment options, many are turning to expert analyses, such as those provided by The Motley Fool, which focuses on undervalued blue-chip and growth companies likely to excel once market conditions stabilize.
Diversification remains crucial even as markets improve. Analysts at Morningstar indicate that healthcare stocks generally maintain stability, as demand for healthcare services and products persists regardless of economic conditions. Giants like Johnson & Johnson and Pfizer have demonstrated resilience during economic downturns. Defensive sectors such as utilities and consumer staples also contribute to stability, while dividend-paying stocks offer consistent income during uncertain times. Strategists maintain that while dividend stocks might underperform in periods dominated by high-growth stocks, they typically demonstrate resilience during downturns.
Bond ETFs are garnering renewed interest as lower interest rates drive up bond prices, further underscoring the value of a mixed portfolio containing equities alongside fixed income investments. For those looking to create or rebalance their portfolios, platforms like CIBC Investor’s Edge provide robust, low-cost options for DIY investors, offering opportunities to research stocks, ETFs, and bonds, alongside analyst reports and educational resources.
As economists temper their recession forecasts, buoyed by interest rate cuts and strong consumer spending, organizations like Goldman Sachs estimate that the chances of a recession in 2026 are now below 15%. Analysts suggest the market may experience modest single-digit returns through the rest of 2025, with notable opportunities in sectors related to energy transition, infrastructure, and dividend growth.
With declining interest rates and easing inflation, investors find themselves with a rare chance to acquire quality firms before the next bull market takes off. A “barbell” investment strategy, combining defensive dividend-paying stocks with selected growth opportunities, is recommended.
Investors are encouraged to conduct thorough research using resources like The Motley Fool and to maintain diversified portfolios through DIY platforms like CIBC Investor’s Edge. New investors might also consider setting up automated investing through services such as Simplii Financial, which can facilitate consistent contributions to registered accounts, allowing them to navigate various market cycles effectively.
