May 2025 Market Recap: Around the World in 30 Days

Special Edition for Canadian Retirees

Welcome to the May edition of Around the World in 30 Days, your monthly digest of global and Canadian financial events—designed for retirees seeking clarity and confidence in their investment journey. May brought renewed optimism, mixed with caution, shaped by trade developments, central bank signals, and domestic economic insights. Here’s what mattered most.

Market Recovery: Equities Bounce Back

Global markets rallied in May following a truce in major U.S.–China tariffs. The S&P 500 and DJIA posted their strongest monthly gains since 2021, with a return around 5.6%. In Canada, the TSX Composite recovered from April’s dip, led by materials and tech sectors, fueled by risk-on sentiment.

Canada’s Economy: Mild Expansion Despite Headwinds

• GDP rose 2.2% annualized in Q1 2025, driven by export and inventory rebounding

• Job growth slowed, with April adding just 7,400 positions and unemployment ticking up to 6.9%

• Inflation eased, thanks partly to the carbon tax removal, though business input costs remain a concern

This backdrop supports the Bank of Canada’s pause at 2.75%, though markets expect modest cuts later in the year

Trade & Tariffs: A Shift in Tides

• A 90-day thaw in U.S.–China tariffs announced mid-May calmed global markets, lifting both equities and commodities

• Canadian exporters surged shipments in Q1 to beat anticipated tariffs, but April saw a 15% pullback due to increased barriers

• U.S. threats of new tariffs on Europe and Canada weighed on TSX futures and raised caution in Canada’s business outlook

Currency & Commodities: Gold Outperforms, Oil Steadies

• Gold rallied once again as investors sought safe havens amid uncertainty

• Oil showed mixed trends, plateauing mid-month, but supported by cautious global sentiment

• Canadian dollar remained stable around US$0.74–0.75, buffered by resilient export data.

Central Bank Outlook: Pause, With Cuts on the Horizon

• Bank of Canada held rates at 2.75%, citing trade uncertainty but remains open to cuts later in the year

• Analysts generally expect two cuts by year-end—possibly ending the year near the neutral 2.25%

• Bank of Canada’s Financial Stability Report cautioned that prolonged U.S. tariffs could stress Canadian banks and household debt

For Canadian Retirees: Insights & Actions

1. Diversify Across Assets & Currencies
   Export-led volatility makes having both domestic and international exposure important. Consider global ETFs or U.S. dividend stocks in your RRIF/TFSA portfolio.

2. Balance Yield with Stability
   With central bank pauses likely, laddered GICs, high-yield savings, and preferred shares remain attractive for reliable income.

3. Plan with Flexibility
   Tax-loss harvesting in non-registered accounts, cash flow smoothing with RRIFs, and using TFSA room to capture upside are wise moves.

Story of the Month: John & Mary’s Export-Smart Plan

John and Mary, retired from London, Ontario, saw their investments waver in April. In May, they met with their advisor and diversified a portion of their TFSA holdings into U.S. and global commodity ETFs, reducing Canadian heavy industry exposure. The stability in their portfolio brought relief—and renewed confidence in their plan.

“We wanted to lean into growth without losing secure income,” said Mary.
“Having both Canadian and global holdings means we’re cushioned no matter what direction trade takes.”

Looking Ahead: Navigating the Long Game

As global trade volatility persists and Canada eyes mild policy easing, retirees should remain vigilant but not reactive. A measured, income-focused approach—with diversification and adaptive tax strategy—remains key.

Thanks for reading Around the World in 30 Days.
See you in June with more insights, stories, and strategies to help Canadian retirees thrive—from Vancouver to Halifax.