Futures lower, Ontario unveils stimulus, banks under pressure, Tesla bull winces
There is a gob of play-doh newly enmeshed into my bedroom carpet. Normally this would set-off a material increase in tempers while I mentally calculate how much this is going to cost me. Recent events have given me perspective. It could be worse, it’s not like they made a $6 trillion mess for someone else to clean up.
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Pain trade: Futures are indicating a sharply lower open this morning as tariffs continue to roil the markets. The S&P 500 is indicated down about 2.5%, however that is better than the more than 3% drop when futures opened Sunday night. Investors are hoping that central banks will swoop in to soften the blow, with the market now pricing in five rate cuts by the Federal Reserve. If today’s losses hold, this would be the worst three-day sell-off since the Financial Crisis in 2008. Citi’s US equity strategist says 4,700 is where the S&P 500 would be fully pricing in the impact of tariffs (7% lower from here). It is very possible we enter a bear market today or this week. The last bear market (20% drop from peak) was in 2022 however it occurred over a period of 10 months. This “tariff tantrum” happened in 1.5 months. Over the weekend, the US administration showed no signs of blinking with Trump signaling that the pain is necessary to correct their perceived trade imbalances. While equity investors have been bearing the brunt of this pain, bonds have been rallying. The US 10-year yield has dropped below 4% for the first time since October. Oil prices are trading around $60/bl, the lowest level since 2021. In Trumpian terms, he can take credit for lowering interest rates and the price of gas!
Oh, Canada: The Canadian markets have been holding in better than US markets, but have still been damaged by the trade war. The TSX is down 6% So far in 2025 and in official correction territory (-10% from peak) as of Friday. The pressure on commodities is likely to weigh on our index. With the plunge in oil prices, the TSX Energy sector is trading at the lowest level since September. Copper is a pain point this morning with the most economically sensitive metal down nearly 17% from its all-time high literally less than 2 weeks ago. Even gold struggled to see the bright side of tariffs and gold mining stocks plunged to a nearly one-month low. However, gold typically does well in periods of economic shock according to analysis from TD’s Wayne Lam. “Looking at three-month performance following an economic shock, we highlight past outperformance of gold equities vs. the S&P 500, including the COVID-19 period (+16% vs. SPX), Bear Stearns collapse (+22%), and the (Long-term capital management) crisis (+24%),” wrote Lam (see chart below).
Unbanked: Bank stocks on both sides of the border have come under pressure as recession odds grow. Morgan Stanley is downgrading the banking sector in a note that says the risk of a bear case recession scenario is “rising sharply.” Jamie Dimon, the CEO of JPMorgan, urged a quick resolution in his annual letter to shareholders. He warned the longer this situation persists the harder it is to reverse the negative cumulative effect. The elder statesman of Wall Street offered a clear-eyed assessment of Trump’s policies without naming him. “America first is fine, as long as it doesn’t end up being America alone,” Dimon said. JPMorgan reports quarterly results this Friday, unofficially kicking off US earnings season and giving investors an opportunity to hear directly from CEOs about how tariffs will affect business. Canadian banks have been hurt as well, trading at a 7-month low and down 10% from its recent peak. Estimates are being cut across the board and National Bank’s Gabriel Dechaine warns about chasing these names lower before knowing whether this is a short or prolonged crisis. “If…we are heading into a crisis-like situation akin to historical ones (e.g., early 90s recession, GFC, COVID), then the recent pullback is in its early stages,” wrote Dechaine who cut his 2026 profit forecasts by 7%, “Past crises typically last 9 months on average.”
OnAID: The Ontario government just announced $11 billion in support for businesses amidst the tariff uncertainty. Most of this ($9 billion) will be in the form of tax deferrals for select provincially administered taxes. “We can’t control President Trump, but we’re in full control of the kind of future we build for ourselves,” wrote Premier Doug Ford in the release. Announcements like this highlight that one of the consequences of trade uncertainties will be more government spending and higher deficits.
Eye of the storm: Shares of Tesla are down 6% in the pre-market as one of the most ardent bulls slashes his price target. Dan Ives of Wedbush is maintaining his buy rating but cutting his price target from $550/share to $315/share (a 40% haircut). “The economic tariff Armageddon unleashed by the Trump Administration is a double whammy for Tesla in our view,” wrote Ives. He says Tesla will be hit by tariffs on batteries and parts sourced from outside the US. “The bigger worry in our opinion is Tesla’s success in China as this key region is the linchpin to the future success of Tesla. The backlash from Trump tariff policies in China and Musk’s association will be hard to understate and this will further drive Chinese consumers to buy domestic…” wrote Ives. However, he maintained his buy rating as old habits die hard. “We have been one of the biggest supporters of Musk and Tesla over the last decade….but this situation is not sustainable and the brand of Tesla is suffering by the day as a political symbol,” opined Ives, “Musk has been with his back against the wall many times and every time Tesla came out of it and was stronger on the other side…this may be one of his biggest challenges yet to turn around.”
