04:25 PM EDT, 03/14/2025 (MT Newswires) -- The Toronto Stock Exchange closed out another volatile week with a gain of 350 points on Friday amid hopes that Canada's newly sworn in Prime Minister and former central banker, Mark Carney, is the person to guide the country through this period of threats on the Canadian economy and sovereignty from the United States.

In the end today the TSX was up 1.45% at 24,553.4, leaving it down a total of about 150 points for the week after wild fluctuations most days. Among sectors, the biggest gainers included Base Metals, up 2.9%, and Info Tech, up 2.8%, while. Telecoms, down -1.2%, was the sole decliner.

Now that former Bank of Canada and Bank of England Governor Carney has been sworn in as the 24th Prime Minister of Canada, he can "get to work", said Desjardins. So far, Desjardins noted, federal measures have been limited with Parliament prorogued. But Desjardins did note Carney has committed to eliminating the carbon tax, which he may be able to do without parliament approval and ahead of the scheduled April 1 increase.

"Carney's broader economic priorities remain to be fully detailed, though his leadership campaign has outlined some key elements," Desjardins said. "He has pledged a narrower fiscal deficit than his predecessor, meaning the response to this shock is unlikely to mirror the COVID playbook. A response proportionally similar to the 2009 Economic Action Plan -- about $75 billion over two years -- appears a reasonable assumption. We estimate that this would be within what the federal government can afford without seriously compromising its fiscal credibility. In terms of composition, a mix of short-term fiscal measures and long-term investments, particularly in infrastructure and defense, which Carney has suggested should be accounted for separately in a capital budget, would likely define his fiscal approach."

"Overall," Desjardins added, "the new Prime Minister has only limited tools at his disposal until Parliament resumes. The scope of his policy response will depend on how quickly an election is called. In the near term, markets are likely to react more to trade developments from Washington than to Carney's first, and likely constrained, policy moves."

Still, Douglas Porter, chief economist at BMO Capital Markets, noted "this week brought a new Canadian Prime Minister, but the same old trade war." Carney, replacing Justin Trudeau following his nearly a 10-year stint, has been "promptly thrown into the fire of a raging trade inferno", Porter said. He noted the main new news this week was the U.S. 25% tariff on all steel and aluminum imports, which prompted like-sized retaliation from the European Union and Canada. Then a plan by Ontario Premier Ford to impose a 25% export tax on electricity was cut short by a U.S. threat of a 50% tax on steel & aluminum, and to destroy Canada's auto industry.

"While a Washington visit by Ford and various senior federal ministers turned down the heat somewhat, there was no tariff relief and Canada still seems to be a prime target for the April 2 'reciprocal' measures," Porter added.

Meanwhile, market watcher, David Rosenberg, wrote there was a message to Washington in today's University of Michigan Consumer Sentiment Survey. He said, "You couldn't have picked a worse data point for both stocks and bonds than the preliminary March reading on the UMich consumer sentiment survey. The White House is going to need to do a better job to show that the tariff file is not going to be cost inflationary, because the one-year median inflation expectation measure jumped to 4.9% from 4.3% in February (consensus was 4.3%) and the 5-10 year comparable spiked to 3.9% from 3.5% (consensus here was 3.4%). The one-year metric is at its highest level since November 2022, and for the 5-10-year expectation, its highest since February 1993. This is a problem for a Fed that sees these numbers as a challenge to its anti-inflation credibility (especially with Powell's term ending in about a year and the miserable memory of 2021-2022)".

In a separate article his colleague at Rosenberg Research, Marius Jongstra, noted talk of 'stagflation' has picked up among the investing community, and he has broken down what an investing playbook would look like in this environment.

In an Executive Summary, Jongstra wrote: "Growth fears have combined with tariff-related inflation concerns, bringing talk of "stagflation" in the U.S. economy back to the fore. Such an environment is reminiscent of the 1970s -- with important implications for asset prices. While this is not our base case, we break down what a stagflation playbook would entail should higher inflation and slow growth persist. Real assets will outperform, with commodities being an obvious winner. Within equity markets, those tied to commodity prices are by far the top performers. Investors should also maintain a bias towards value stocks (over growth stocks)."

Of commodities today, West Texas Intermediate crude oil closed higher as Russia appeared to reject a U.S.-backed ceasefire in Ukraine, reducing the chance for the lifting of sanctions on Moscow and the full return of the country's oil to international markets. WTI oil for April delivery closed up $0.63 to settle at US$67.18 per barrel, while May Brent crude was last seen up $0.65 to US$70.53.

Also, gold edged down from a record high late afternoon on Friday after rising above US$3,000 for the first time as falling stock markets and global economic turmoil spurred by Donald Trump's trade wars spur safe-haven buying. Gold for April delivery was last seen down $0.50 to US$2,990.80 per ounce.

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