3 Things You Need to Know This Week | Canada Politics, US Economy, US Gov't. Funding (March 10, 2025)

Transcript

Mathew White:

Hello and welcome to 3 Things You Need to Know This Week—our regular series, designed to help you sift through the noise across financial media and understand what really matters for markets.

And now, here are three things you need to know this week.

First up, Canada's Liberal Party leadership change.

On Sunday, Canada's Liberal Party announced the results of its leadership election following the resignation of Justin Trudeau in January. Canada's parliament remains closed until March 24th— after which a no-confidence vote is expected. Liberal party leaders hope that choosing a new leader will boost their popularity with voters before the next election. And while a federal election isn't required until October 2025, the no-confidence vote could move it up.

Sunday's announcement resolved some uncertainty, but big questions remain about the timing of future elections. That lingering uncertainty may continue to affect Canadian sentiment for a while. Canada is a relatively small portion of global stock markets, and we're more optimistic about other regions of the world to lead markets this year, like Europe. But eventually clarity in Canadian politics will emerge— and political clarity tends to be a good thing for stocks.

Next, US economic data.

Lately, fears of a weakening US economy have picked up amid tariff concerns, job growth worries and a re-acceleration in inflation data. But in our view, it's important to remember much of this is backward looking, and as always, context matters. For example, while last week's February jobs report modestly disappointed, nonfarm payrolls were roughly in line with 2024 average and pre-pandemic trends. Wednesday's inflation report will be closely watched, and while inflation has ticked up in recent months, its overall trend has been down, and we don't think recent tariffs will change that trajectory.

Short-term swings in economic data are normal. But when you look at a broad set of fundamentals, the US economy is in fine shape. Businesses are investing, consumers are spending and banks are lending. We acknowledge sentiment is higher in the US than elsewhere, and that may mean some mild disappointments here and there. But in our view, recession talk seems premature at best. We'll continue to monitor for any cracks that may appear, but for now, the US economy appears more resilient than many give it credit for.

Finally, US government funding negotiations.

US lawmakers have a big deadline coming up— March 14th marks the expiration of government funding, and without a deal, a partial government shutdown will happen. And right now, it's unclear if Congress will pass new funding or if a short-term funding bill might be needed to extend the deadline.

Senate and House Republicans have different ideas about how to implement the Trump administration's priorities. Both the Senate and the House have passed their first budget proposals for the 2025 fiscal year—but even with these proposals, the path to finalizing a budget can be complicated. Any bill would need to be reconciled between the two houses— and that would involve negotiating more details. For now, tax and budget uncertainty remain, and whether we face a government shutdown is unknown.

So, while we may see short-term volatility as the deadline approaches, history shows this rarely lasts. Even in times where we've had longer government shutdowns, stocks have typically been higher over the next 6- and 12-months. And it's important to remember a shutdown is not the same as a default. The US government can amply cover its debt obligations even in a shutdown scenario. So, as these fears eventually fade, markets should benefit.

And that's it for this episode of 3 Things You Need to Know This Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit fisherinvestments.com. Thanks for tuning in, and don't forget to subscribe!