TSX Volatility Reflects US-Fed Tensions Amid Powell Backlash

The Toronto Stock Exchange’s S&P/TSX Composite Index faced heightened volatility in April 2025 as U.S. President Donald Trump’s rhetorical attacks on Federal Reserve Chair Jerome Powell reverberated across North American markets. Trump’s oscillating threats—first to fire Powell, then to disavow such actions—exposed the precarious balance between political influence and central bank autonomy, with Canadian equities serving as a barometer for shifting investor sentiment.

The TSX’s trajectory mirrored the U.S. market’s roller-coaster ride. On April 22, after Trump labeled Powell a “major loser” and hinted at removing him, the TSX dropped 0.6% to 24,037.16 points, ending a five-day winning streak. This decline reflected fears that political interference could destabilize the Fed’s independence, a pillar of market stability. Energy stocks led the selloff, falling over 1%, as falling oil prices—spurred by U.S.-Iran nuclear talks—compressed margins for Canadian producers. Meanwhile, healthcare shares, including Bausch Health Companies (BHC.TO), tumbled 7%, a loss later reversed as investor Carl Icahn disclosed a stake in the company.

However, markets stabilized once Trump backtracked on April 28, declaring he had “no intention of firing Powell.” This reassurance triggered a 1.2% rebound in the TSX, with energy and healthcare sectors leading the recovery. illustrate the sector’s volatility, swinging from a 7% loss to a 9% gain within two days—a stark example of how geopolitical and policy noise impacts Canadian equities.

Sector-Specific Dynamics

The TSX’s performance was uneven across sectors, highlighting the interplay of global macro trends and domestic factors:
- Energy: Declines were tied to oil price drops (e.g., Suncor Energy, Cenovus Energy) but stabilized as geopolitical risks eased.
- Healthcare: Bausch Health’s swings underscored market-wide nervousness, while broader sector gains (3.6% on April 28) reflected relief from Powell’s perceived security.
- Materials: Gold miners (e.g., Wheaton Precious Metals) surged as gold hit record highs, with prices rising 2.9% to $3,425/oz. shows the inverse correlation between safe-haven demand and equity volatility.

Broader Market Context

The TSX’s resilience compared to the U.S. S&P 500—down 1.7% year-to-date versus the S&P 500’s 10.8% decline—reflected Canada’s diversified economy and reduced exposure to U.S. political volatility. Analyst Douglas Porter of BMO Capital Markets noted Canada’s role as a “safer” investment hub, though he warned that lingering U.S. trade and policy risks (e.g., tariffs, Fed independence) remained unresolved.

Risks Ahead

The Bank of Canada’s two scenarios highlight the stakes:
1. Scenario 1 (Partial tariff resolution): Business investment and global demand weaken, but a 70-cent Canadian dollar cushions export sectors.
2. Scenario 2 (Global trade war): Oil prices plummet to $60/Brent, the loonie sinks to 67 cents USD, and equity valuations face prolonged headwinds.

Conclusion

The TSX’s April volatility underscores its sensitivity to U.S. policy dynamics, particularly the Fed’s independence and trade tensions. While Trump’s backtrack on Powell eased immediate pressures, the TSX remains exposed to geopolitical and macroeconomic risks. Sectors like gold mining and healthcare will continue to act as barometers of investor sentiment, while Canada’s election and trade policies offer domestic buffers.

Key statistics reinforce this outlook:
- The TSX outperformed the S&P 500 by 9 percentage points year-to-date, reflecting its commodity-driven resilience.
- Gold’s 2.9% monthly rise to $3,425/oz highlights safe-haven demand amid Fed uncertainty.
- Analysts estimate that a 25% U.S. tariff on Canadian goods could trim GDP by 0.5-1%, per Bank of Canada stress tests.

In short, the TSX’s path forward hinges on resolving U.S.-China trade disputes and preserving Fed autonomy—a reminder that global markets remain tethered to the whims of political leaders. Investors should prioritize diversification and risk management, with an eye on both the Fed’s policy trajectory and Canada’s election outcomes.