THIS WEEK WITH SADIQ
Is the “Trump trade” gone for good?
March 31 to April 4, 2025

Market Update
- Equity markets slumped again this week as tariff threats continued to nag and U.S. inflation remained stubborn.
- The S&P 500 fell 1.5%, with steep declines in Communication Services and Technology, while consumer stocks held mostly flat overall. Technology and Consumer Discretionary, which surged 36% and 29% last year, have been the only real significant weak spots so far in 2025, down more than 12% each.
- Meantime, the TSX dipped 0.8% with Technology and Industrials under pressure along with Health Care.
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Weekly Commentary
Tariffs
Last week, U.S. President Donald Trump announced yet another new round of tariffs, this time targeting automobile imports. Trump’s endgame remains unclear—all we know is that tariffs are a key part of his strategy. Is he planning to use them to fund tax cuts? Are they intended to level the playing field with countries that have a trade surplus with the U.S.? Or is it a play to bring manufacturing back to American shores? We suspect it’s a combination of all three, but the truth is that no one knows when enough will be enough—perhaps not even Trump himself. That’s the problem markets are grappling with. For Trump, no number seems to be enough: even if we see certain tariffs settle around 10%, for instance, there could be a new 25% tariff announced the next day, and another one a month later. It’s hard for countries, sectors, and companies to plan for the year ahead in that kind of environment, which is why we’ve seen markets gyrate more recently, depending on the news story that day. Our expectation is that volatility will remain elevated. That said, we also think that we are approaching levels that become very good buying opportunities (i.e., the worst may be close to being behind us). We believe that markets are correctly pricing in the challenges of the current environment. If things do get worse on the tariff front, there is likely room for markets to go lower. But we think it’s time to start looking for opportunities to dip your toes back in—as long as you don’t give up your hedges.
Bottom Line: While the tariff situation remains uncertain and volatility is likely to remain elevated, we think it’s worth looking for new opportunities while maintaining some defensive positioning.
Trump
Is the “Trump trade” over? We think the answer is yes—at least for the moment. When Trump took office in January, there was a great deal of optimism in markets, especially with respect to expected tax cuts and deregulation. Now, tariffs and geopolitical risk have taken over the conversation (two risks we highlighted in our 2025 outlook), and it’s unclear when Trump will return to his pro-business proposals. Could markets’ bullish sentiment be restored further down the road if and when the tariff situation is resolved? Possibly. But for now, the timing is unclear. One example of how the “Trump trade” hasn’t played out as expected is small caps. So far this year, they haven’t provided the outperformance we anticipated, but that expectation was partly based on the likelihood of tax cuts that would disproportionately help small caps relative to large-cap companies. A nice bump for small caps is still on the table if the Trump administration eventually prioritizes those policies, but for now, investors will have to be patient.
Bottom Line: The “Trump trade” is over for now, but could be re-ignited if the tariff situation is settled and he re-prioritizes tax cuts and deregulation.
A.I.
Recently, Tech investors have been grappling with seemingly conflicting narratives on artificial intelligence (A.I.). On the one hand, ChatGPT operator OpenAI is reportedly close to securing $40 billion in funding from SoftBank,1 while on the other, expectations for A.I. leader Nvidia appear to be down. Our stance is that the A.I. story is not dead by any means—in fact, it’s very strong. Overwhelmingly, companies are still looking for ways to participate in the A.I. theme and establish themselves at whichever part of the supply chain they can. Nvidia had first-mover advantage and did exceptionally well at a critical part of that chain: manufacturing A.I.-capable microchips. But now, the company is facing the pressures of a more competitive market, which means investors have to figure out the right valuation given potential pricing pressures. We don’t expect Nvidia’s dominance to go away any time soon—it is a well-managed company with strong balance sheets and a demonstrated ability to adapt. Going forward, however, it will have to embrace increased competition and price pressures. For Nvidia investors, that short-term noise may be the price of longer-term upside.
Bottom Line: We believe the A.I. theme is still strong, and while we expect Nvidia to continue to be a dominant player, it will be the subject of greater investor scrutiny.
Positioning
For a detailed breakdown of our portfolio positioning, check out the latest BMO GAM House View Report, titled Watching the wild card: How to invest in the Trump era.
1 Kate Clark, Katie Roof, Shirin Ghaffary, and Gillian Tan, “OpenAI Close to Finalizing $40 Billion SoftBank-Led Funding,” Bloomberg, March 26, 2025.