3 Things You Need to Know This Week | Canada Election, US & Eurozone GDP, US Jobs (Apr. 28, 2025)

Transcript

Paige Tyson:

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

First, Canada's election.

As a reminder, our analysis is always politically agnostic, and we don't believe politics should drive investment decisions. It's a common belief that certain parties might be better for stocks, but history proves stocks have done well, regardless of political leadership. Today, Canadians head to the polls for federal election day, where voters will decide whether recently appointed Prime Minister Mark Carney will hold on to the top job and whether the Liberal Party can ride its recent momentum to a majority in parliament. Conservatives had a wide lead in polling prior to Justin Trudeau's resignation in January, but since then, Liberal polling has surged, largely in response to Canadian backlash over US tariffs and rhetoric. Now, polls suggest the liberals may not only win the most seats but could even secure the 172 seats needed for a majority. As the results come in and the next Canadian parliament takes shape, we expect political uncertainty to ease. That added clarity could provide a modest tailwind for Canadian stocks, but it's worth remembering that politics are just one piece of that broader market puzzle. While Canada may see a short-term boost, we continue to see stronger return potential in regions like Europe.

Next, US and eurozone GDP. 

On Wednesday, we'll get the first estimates of first quarter GDP for both regions, just as recession fears are picking up steam. If data come in weaker than expected, some may say that's proof that tariffs are slowing the global economy. But on the other hand, stronger results may just be dismissed as old news, with many expecting tariffs to weigh more heavily on future economic growth. From our perspective, we'd encourage investors not to read too much into a single quarter. One negative GDP print doesn't mean a recession is here or even on the way. It's not unusual to see a brief contraction in the middle of a broader expansion. Recently, we've seen a lot of commentary suggesting these GDP reports are old news because they predate the latest tariffs. And that's true, but it's also always been the case. Economic data by nature looks backward. And while that information can be helpful, it's never been reliably predictive for where stock prices are headed. Stocks look forward. So whatever happened in Q1, markets have already priced it in and are already focused on what's next.

Finally, US jobs. 

This Friday, we'll get U.S. labor market data for April, including nonfarm payrolls and the latest unemployment rate. Expectations are for job growth to slow and for unemployment to hover around 4.2%. That's the same level we saw in March, and the highest since last November. And there's likely going to be a lot of debate around this report, especially with the Trump administration's push to reduce the size of the federal workforce. And understandably, this is an emotional topic, especially for those affected by layoffs. But for investors, it's important to take a step back and look at the bigger picture. From that angle, we don't believe the announced layoffs have the size or the scope to materially impact the US economy. While headlines may focus on sweeping federal jobs cuts, the actual number so far at least tell a much more muted story. In March, federal payrolls, excluding the Postal Service, fell by just 3200 jobs. That's far fewer than some of the more dramatic estimates making the rounds in the media.

So why the disconnect? Well, much of the coverage talks about planned layoffs, but in official data, people still receiving severance or on paid leave are counted as employed. That means it could take time and possibly even court decisions before these changes show up in the numbers. And regardless, it seems a robust private sector can largely absorb displaced government workers. And even if the federal workforce shrinks by a few hundred thousand, it would land around 2.8 million, which isn't without precedents. Back in the 1990s, federal employment fell from about 3.1 million in 1993 to just under 2.8 million by 1997. That's a 10% decline that happened alongside strong economic and market growth. Now we are not minimizing the uncertainty these layoffs create or the real impact they have on individuals and families. But importantly for investors, we don't think the numbers are large enough to meaningfully move the needle on economic growth or cause a recession.

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!