Global financial markets experienced notable fluctuations on Monday, triggered by President-elect Donald Trump’s denial of a Washington Post report suggesting a softer stance on tariffs and Canadian Prime Minister Justin Trudeau’s unexpected resignation. These events underscored the potential for heightened volatility in 2025 due to ongoing uncertainties surrounding policy, politics, inflation, and interest rates.
The Washington Post report initially indicated that Trump’s administration was considering targeted tariffs focused on specific sectors crucial for national security and economic stability, rather than the broad-based tariffs promised during his campaign. This potential shift prompted a surge in European stocks and currencies. However, Trump swiftly dismissed the report as “Fake News” on social media, reigniting concerns about his trade policy intentions.
Matt Orton, chief market strategist at Raymond James, emphasized the likelihood of increased market volatility in 2025 due to these uncertainties. “I think what this highlights is that it’s going to be an interesting year,” Orton stated. “In addition to that, which is the key piece of my outlook for 2025, is this idea that we are going to have more volatility events because there’s so much uncertainty with respect to policy, politics, inflation, and the path of rates.”
The reaction in U.S. equity markets was mixed. The S&P 500 and Nasdaq Composite indexes closed higher, driven by gains in communication services, technology, and materials sectors. Conversely, the Dow Jones Industrial Average edged lower, weighed down by losses in consumer staples stocks. Specifically, the Dow fell 0.06% to 42,706.56, the S&P 500 rose 0.55% to 5,975.38, and the Nasdaq climbed 1.24% to 19,864.98.
European markets responded more positively to the initial tariff report. The pan-European STOXX 600 index closed up 0.94% at 512.37, nearing its session high. Globally, the MSCI All-Country World Index rose 1.20% to 857.39.
The U.S. dollar weakened against major currencies, with the dollar index falling 0.68% to 108.22. The euro gained 0.8% against the dollar to $1.039. Meanwhile, the Canadian dollar appreciated 0.78% against the U.S. dollar to 1.43 following Prime Minister Justin Trudeau’s announcement of his resignation after nine years in office.
In the fixed-income market, yields on long-term U.S. Treasury securities, including the 10-year and 30-year bonds, rose as investors assessed the implications of Trump’s tariff stance. The 10-year yield increased 1.7 basis points to 4.612%, while the 30-year yield climbed 1.9 basis points to 4.8337%. In contrast, the yield on the 2-year Treasury note, sensitive to Federal Reserve interest rate expectations, declined 1.5 basis points to 4.264%.
Oil prices experienced volatility, with Brent crude futures settling 0.3% lower at $76.30 per barrel and U.S. West Texas Intermediate (WTI) crude falling 0.5% to $73.56. Gold prices also retreated, with spot gold down 0.1% to $2,636.35 per ounce and U.S. gold futures settling 0.3% lower at $2,647.40. The rising U.S. Treasury yields offset the pressure from the weaker dollar.
Tom Plumb, CEO of Plumb Funds, commented on the ongoing uncertainty surrounding Trump’s policy decisions. “We are going through this game where they are going to continue to use trial balloons from other people, giving the president the right to disclaim if he’s not happy with the messaging,” Plumb noted. He also highlighted the strong earnings growth expectations for leading companies in the S&P 500, suggesting continued market optimism despite the political and economic uncertainties. “We are still in the spot where if you look at the top 11 market-cap companies in the S&P 500, they’re expected to have 50% earnings growth.” This combination of strong corporate performance and policy uncertainty sets the stage for a potentially volatile but ultimately interesting year for global markets in 2025.
