The Steele Group's Q1 2025 Newsletter

The first quarter of 2025 was a turbulent period for global financial markets, characterized by a shift from initial optimism to heightened uncertainty. Trump’s rhetoric, tariffs, counter-tariffs, potential trade wars, unanticipated marked shifts, along with the accompanying non-stop media coverage, have combined to amplify investor anxiety and undermine investor confidence. Our advisors recognize the fears investors face during this period of market uncertainly and employe our three bucket approach to ensure a solid financial foundation and long-term confidence. Please click here “Managing Volatility with the 3 Bucket Strategy” to learn more about our three bucket approach to investing.

In Q1 the U.S. markets faced a notable correction, with the S&P 500 declining by approximately 4.6%; marking its worst quarterly performance since Q3 2022. This correction was caused in part by concerns over a potential economic slowdown, persistent inflation, and uncertainty surrounding U.S. trade policies under the new Trump administration, including the imposition of tariffs on major trading partners such as Mexico, Canada, and China.

Sector performance in the U.S. was mixed. Energy and healthcare sectors outperformed, with gains of 9.3% and 6.08% respectively, buoyed by resilience amid economic shifts. In contrast, technology and consumer discretionary sectors were hit with declines exceeding 10%, reflecting sensitivity to trade war fears and reduced investor confidence in growth oriented stocks. A rotation from growth to value stocks was evident, reversing trends from 2024.

Globally, markets ended Q1 with varied outcomes. The Hang Seng Index led with a 15.25% gain, driven by strength in Chinese equities, while European markets , such as the Euro Stoxx 50 (+7.2%), DAX (+11.32%). and CAC 40 (+5.6%), also outperformed the U.S., supported by forceful fiscal responses and expectations of monetary easing from the European Central Bank, which cut rates twice in the quarter. Emerging markets eked out a modest 0.7% gain, aided by a weaker U.S. dollar, while Japan’s Nikkei fell 10.7%, pressured by rising inflationary expectations and higher bond yields.

Economic indicators painted a complex picture. U.S. GDP growth was projected at 2% for 2025, though some models suggested a Q1 contraction. Corporate earnings expectations for the S&P 500 softened from 14.8% to 11.5% year-over-year growth, with valuations remaining elevated. The Federal Reserve paused rate cuts in March, projecting just two 25-basis-point reductions for the year, citing higher inflation (core PCE at 2.8%) and lower growth forecasts.

Q1 started with a US unemployment rate of around 4%. For perspective, average unemployment in the US over the last 30 years has been around 5.9%. Q1 ended with announcements that employment expectations of 135,000 were incorrect and the US generated 228,000 new jobs (which includes over 4,000 federal job cuts due to DOGE efforts to reduce government costs). There are higher hopes from the current Trump administration that the widespread cuts via DOGE will free-up additional Federal resources.

Governments and companies globally have had mixed reactions due to the lack of clarity from the US administration on tariffs. In some cases we are seeing counter tariffs and in other cases we are seeing countries attempting to resolve the imbalance of trade with the US.

Even with the lack of clarity within the first 2 months of the Trump administration there has been an estimated $3.3 Trillion dollars of new commitment on US economic spending. Some of the below items could have already been “planned projects” however the totality of these investments will over the next few years will have a positive impact on the US economy and job creation.

Company/Group	Estimated Spending Commitment	Details
Hyundai Motor Group	$21 billion	Announced March 24, 2025: $5.8 billion steel plant in Louisiana (1,400+ jobs), $9 billion for U.S. vehicle production expansion, $6 billion in tech (AI, robotics, etc.). Some overlap with a prior $10 billion pledge from 2022.
Honda	Not specified (existing plant)	March 2025: Plans to shift Civic hybrid production from Mexico to Indiana (Greensburg plant) by 2028, responding to tariff pressures. No new plant; using existing capacity.
Taiwan Semiconductor (TSMC)	$100 billion	March 3, 2025: Expansion of semiconductor manufacturing in Arizona with three new factories, boosting U.S. chip production.
Apple	$500 billion	Pledged over Trump’s term for U.S. investments, potentially creating 20,000 jobs, to mitigate tariff impacts and boost domestic manufacturing. Exact timeline unclear.
SoftBank, Oracle, OpenAI	$500 billion	March 2025: Joint investment in AI and tech infrastructure, often cited as "Stargate AI" project, though specifics on timing and allocation remain vague.
NVIDIA	$100 billion+	March 2025: Investment in U.S. AI chip production and infrastructure, aligning with tech reshoring efforts.
Johnson & Johnson	$55 billion	March 2025: Pharmaceutical investment in U.S. manufacturing and R&D, part of broader reshoring trend.
Saudi Arabia	$600 billion	Pledged for U.S. energy, tech, and infrastructure projects since Trump’s term began, though details are broad and long-term.
United Arab Emirates (UAE)	$1.4 trillion	Investment commitment in U.S. sectors like energy and real estate, cited as part of Trump’s diplomatic wins, though specifics are still emerging.
Nippon Steel	$14.1 billion	Part of a bid for U.S. Steel, under review as of March 2025, reflecting foreign interest in U.S. industrial assets.
Hussain Sajwani (DAMAC)	$20 billion	UAE-based developer’s pledge for U.S. real estate and infrastructure, announced in March 2025.

Outside the U.S., Trump’s actions have pushed regions such as the EU to establish their own spending programs to counter U.S. tariffs. For example, in February 2025, the EU secured a €1.5 billion Hyundai plant investment. As the EU shapes its 2028–2034 budget in 2025, there are proposals to boost tech and energy security spending—building on existing commitments such as the €363 billion allocated to green projects between 2021 and 2027, which is expected to increase. Analysts advocate for integrating green energy into security budgets, emphasizing the growing overlap between technology and energy sectors.

One major concern is inflation. We may be witnessing a similar economic scenario to the COVID-era stimulus, when global governments and companies committed to large-scale spending, resulting in strong growth during 2020–2022 but ultimately leading to the inflation observed in 2023 and 2024.

Domestically, Canada has been hamstrung by a non-functioning federal government. We’ve seen provinces lose confidence in the federal system, increasingly taking trade matters into their own hands by negotiating directly with the U.S. administration—though with limited success in delaying tariffs. In the meantime, companies across Canada are postponing projects due to uncertainty, contributing to rising unemployment and a slowdown in many sectors.

Although the upcoming Canadian election mirrors Trump’s confrontational rhetoric, all major political parties are taking a hardline stance on the U.S.—a position that is politically popular. However, it’s important to look past the rhetoric and recognize that roughly 25% of the Canadian economy is directly tied to the U.S. Any serious move toward “de-coupling” would risk triggering a deep depression and high unemployment. This could result in a negative impact on tax revenues whihc would severely affect Canada’s social programs.

Expectations are that, regardless of the winning party, much of the current election rhetoric is aimed at securing votes. After the election, Canada is likely to engage with the Trump administration to find a resolution. What remains unclear is what concessions—if any—the new government will offer. While the short-term economic outlook in Canada appears negative, the strong economic growth in the U.S. could have a positive spillover effect on Canada once trade relations are re-established.

Overall, Q1 2025 was defined by market recalibration, with U.S. equity corrections, a shift in sector leadership, and divergent global performances amid policy uncertainty and geopolitical tensions. Diversified portfolios benefited from bonds offsetting equity losses, particularly in the U.S., while volatility is expected to persist into the next quarter.

Internally at The Steele Group we welcomed new faces as our team continues to grow and we are excited to announce the promotion of Patrick O’Rourke as an Investment and Retirement Planner. Patrick has been a familiar face in the office for four years and will start to more directly support TSG clients assisting with building and maintain their financial plans.

TSG continues to support the good work of local charities, including donation to the Ronald MacDonald House Charities (RMHC) in late 2024. In March, Mario De Divitiis CEO, Ronald McDonald House Charities South Central Ontario in Hamilton visited our office to provide an update on how our donation was put to use. We learned that nearly 40% of the families they care for in Hamilton come from the Region of Waterloo and Guelph. Mario shared a touching video of a local Cambridge family, highlighting how our donation helped make their stay at RMHC possible this past year. You can view their message on our website by clicking this link:

We are here to support you in achieving your financial goals. If you require any assistance or have any questions please do not hesitate to reach out to Cliff, Mario, Mark, or our TSG team.