Market Volatility Persists Amid Inflation Data and Trade Uncertainty

Inflation Cools, But the Real Impact is Yet to Come

Markets had been anticipating the latest U.S. inflation print, and the data delivered a mild surprise—February CPI came in softer than expected:

•⁠ ⁠Headline CPI: +0.2% M/M (vs. +0.3% est.), +2.8% Y/Y (vs. +2.9% est.)
•⁠ ⁠Core CPI: +0.2% M/M (vs. +0.3% est.), +3.1% Y/Y (vs. +3.2% est.)

The immediate reaction was a rally in U.S. Treasuries, with the 10-year yield dropping to 4.265%. However, the move was short-lived, and yields bounced back to 4.32% as markets digested the broader implications. S&P 500 futures erased early gains, the DXY hovered around 103.64, and gold (XAU) held steady at $2,917.

While this inflation print suggests some cooling, it does not yet account for the full impact of recent tariff hikes, particularly the 25% increase on steel and aluminum imports. That inflationary pressure will take time to filter through the economy, keeping markets on edge.

Trade Tensions Keep Uncertainty High

The trump administration’s decision to maintain—and potentially expand—tariffs on key imports has added another layer of complexity to an already volatile market. The Ontario government’s move to suspend a 25% surcharge on electricity exports to the U.S. highlights the growing trade frictions. Meanwhile, the possibility of retaliatory tariffs from Canada and other key trade partners raises concerns about supply chain disruptions and corporate margins.

Base metals have been one of the few bright spots, with copper gaining 2.8% as investors position for potential supply constraints. However, the sustainability of these gains remains uncertain, as prolonged trade disputes could eventually weigh on global growth.

Looking Ahead: A Long and Bumpy Road into 2025

With inflation data providing only a partial picture and trade policy still in flux, markets are likely to remain volatile. The next major catalysts will be further clarity on tariff implementation and any shifts in monetary policy as the Federal Reserve assesses inflation persistence.

For investors, the road into 2025 will be anything but smooth. Navigating these risks will require a disciplined approach, with a focus on diversification, defensive positioning, and strategic asset allocation.