Market Resilience Amid Policy Shifts: Key Implications for Investors

Ontario’s Energy Policy and U.S. Tariff Developments: Trade Frictions Persist

Ontario’s decision to suspend its 25% surcharge on electricity exports to the U.S. was a welcome development for North American trade relations. However, this was overshadowed by the Trump administration’s decision to move forward with a 25% tariff on steel and aluminum imports from Canada, reigniting uncertainty. While a potential increase to 50% was deferred, the existing tariffs already introduce market volatility.

Sectors dependent on industrial metals, including manufacturing and infrastructure, will likely feel the pinch. While base metals remained resilient—with copper up 2.8%—prolonged trade tensions could weigh on global supply chains. Investors should monitor corporate guidance closely, as any prolonged tariff impact could trigger broader market shifts.

US Job Data Lifts Sentiment, but Labor Market Still Faces Uncertainties

Markets responded positively to January’s JOLTS job openings, which printed at 7.74M, surpassing the 7.6M consensus. However, a downward revision of December’s figures tempers enthusiasm. Notably, federal and local government hiring increased, suggesting continued public sector demand.

For investors, this data affirms the resilience of the labor market, which supports the Federal Reserve’s cautious stance on rate adjustments. However, with certain corporate layoffs still unfolding, a nuanced view is needed. Equities found support, but bond yields climbed, reflecting shifting expectations about economic momentum.

Japan Maintains Allocation Strategy: What It Means for Markets

The Nikkei reported that Japan’s Government Pension Investment Fund (GPIF) will keep its portfolio composition unchanged in the upcoming review, maintaining a 25% allocation to domestic stocks, foreign stocks, domestic bonds, and foreign bonds for the next five fiscal years. While this provided some relief to bond markets, Japanese government bonds (JGBs) saw mild pressure, reflecting prior speculation that domestic bond allocations could be increased.

For institutional investors, this signals stability in Japan’s asset allocation framework. It also means global fixed-income markets may not see an influx of demand from GPIF reallocations, keeping broader bond market dynamics steady. The upcoming 20-year JGB auction will be a key gauge of investor sentiment following this decision.

Upcoming Key Data: All Eyes on U.S. CPI and BoC Decision

Looking ahead, the market’s focus is on:

U.S. February CPI: Expected at +0.3% MoM (+2.9% YoY), down from prior readings. A softer print could reinforce expectations of a gradual Fed pivot.

Bank of Canada Decision: With a 25bps rate cut priced in, the central bank’s forward guidance will be critical for CAD outlook and broader policy expectations.

Investment Takeaway: A Market Balancing Stability and Policy Risks

While economic data continues to offer pockets of resilience, policy uncertainty—whether in trade, tariffs, or central bank actions—remains a key factor driving market sentiment. Investors should position portfolios to balance short-term volatility with long-term fundamentals, particularly in sectors exposed to evolving trade dynamics and interest rate shifts.