Lexicon Financial Group Weekly Update — May 28, 2025
“Around every corner, always protect the engine that powers you.”
From the desk of Craig Swistun, CIM, MFA-P, Portfolio Manager, Raymond James Investment Counsel, and Wayne Hendry, Client Relationship Manager, Raymond James Investment Counsel
Looking Around
We can already hear you thinking, “Why are they writing about engines?” Well, buckle up.
Today, most passenger vehicles are powered by four-cylinder engines. Once upon a time, everyone drove a car with a gas-guzzling eight-cylinder engine. And, can anything really beat the growl of a 307 engine in a 1972 Nova SS? But we digress.
As stricter emissions regulations were passed around the world and fuel costs increased, automakers responded by selling vehicles with smaller engines to meet changing consumer demand. But, as much as the car driving landscape had changed, drivers still wanted power and performance. In order to make a four-cylinder engine as powerful as an eight-cylinder engine used to be, automakers were forced to innovate. They invented new ways of pumping air through the engine (a turbocharger) or supplementing the engine with an electric motor. The horsepower war between four-cylinder and eight-cylinder engines continues but it is guided by what customers want their vehicle to do. (1)
And that’s how markets work. They adapt and respond to outside pressure to meet the changing and evolving needs of their customers. In the auto industry, people wanted more fuel efficiency; so, they reduce the size of the engine. People want more power; so, they develop new technology to deliver on that promise.
Investing is no different. Back in the 1970s, if you wanted to invest, you really didn’t have a lot of options. You could drive your AMC Gremlin to your local bank and buy a Savings Bond. You could buy insurance policies from door-to-door salespeople. If you were really wealthy, you might be able to work with a stock broker who could sell you shares in public companies.
Today, innovation has created a cornucopia of opportunities for investors and professional advisors alike. And, the profession has evolved and matured as well. There are more different models and more varied options, and we’ve chosen the path that we believe best aligns with the interests of our clients. Without innovation, some of the following would not be possible.
We do not earn sales commissions or bonuses for buying and selling individual securities as depicted in the 2013 movie, The Wolf of Wall Street
We make broad use of exchange-traded funds to gain low-cost access to international and speciality markets
We have never invested in structures that lock clients in or have penalties for withdrawing their money
And while the investment industry innovates, there are new products being introduced all the time, new companies being launched, and new bonds being issues. Nevertheless, we do have some core values that we adhere to quite closely.
We believe in the power of well-diversified portfolios to protect and build long-term wealth. Diversification is, therefore, good at preserving the wealth generated in an investment portfolio. (2)
We think that customer service is important, and are always looking to leverage technology to deliver a better experience for everyone. It’s why we introduced online client access back in 2020, for example.
Keeping up-to-date on the changes in investment markets isn’t easy, which is why we work closely with other portfolio managers on portfolio construction and management. It might be fun and nostalgic to drive an old car every once in a while, but modern portfolios are generally more effective and more efficient than those from previous eras.
Read and Watch
Want deeper insight into topics in your Weekly Update? Then, read and/or right click:
These eight data points show how Trump's trade war is already affecting the Canadian economy
Video: Rising to the challenge: Europe’s path to growth and resilience
Japan's core inflation hits more than 2-year high, could force year-end BOJ hike
Looking Back
Although the S&P/TSX composite index (TSX) edged higher last Friday as gold mining shares rallied, it ended down 0.4 per cent for the week due to the resurfacing of trade tensions and investor anxiety about the recent increase in long-term borrowing costs. This decline ended a run of six straight weeks of gains. (3)
Major U.S. stock indexes finished last week lower - the S&P 500 Index and Dow Jones Industrial Average both fell back into negative territory for the year, after ending the previous week slightly positive. Although the technology-heavy Nasdaq Composite fared better, it also ended down last week. The mantra “here we go again” would not have been out of place, as U.S. stocks continued to slide last Friday, after President Trump announced plans to impose a 50 per cent tariff on imports from the European Union (E.U.), effective June 1 due to, in his words, trade talks going nowhere. His announcement also included a threat of 25 per cent tariffs on iPhones unless Apple moves production of the product to the U.S. This sent Apple shares down more than three per cent lower.
A weaker-than-expected auction of 20-year Treasury bonds pushed longer-term yields higher - the 30-year yield hit its highest level since 2023 – in reaction to credit rating agency Moody’s recent downgrade of U.S. sovereign debt and growing concerns about rising U.S. federal debt and fiscal deficits. These concerns were amplified when the U.S. House of Representatives passed President Donald Trump’s tax bill, which some believe could increase federal debt considerably over the next several years.
Despite all of this, U.S. business activity growth rebounded in May, according to S&P Global’s Flash Purchasing Managers’ Index (PMI) survey data. Activity in the services sector improved from a 17-month low in April, jumping from a PMI reading of 50.8 to 52.3 in May. The Manufacturing PMI also improved, increasing from 50.2 in April to a three-month high of 52.3 in May. Both readings were better than consensus estimates and signalled expansion. However, this report also noted that prices rose at the fastest rate since August 2022. This was overwhelmingly linked to tariffs.
In the Europe, the pan-European STOXX Europe 600 Index snapped five weeks of gains by finishing last week down. Other major stock indexes also declined. This was largely due to President Trump’s tariff announcement. Business activity in the euro area unexpectedly contracted – the HCOB Eurozone Composite PMI fell to 49.5 from 50.4 in April, according to a preliminary estimate.
Japan’s stock markets posted losses last week, as markets increased bets on more monetary policy tightening by the Bank of Japan, following hotter-than-expected inflation data. Japan’s headline annual inflation remained unchanged at 3.6 per cent in April but core inflation accelerated to 3.5 per cent - the highest reading in more than two years. This data reinforced the view that inflationary pressures are becoming more entrenched in Japan.
Stock markets in China declined last week, as attention turned back to the economy, after Beijing and Washington struck a temporary trade truce. Industrial output rose a better-than-expected 6.1 per cent in April from a year ago. However, retail sales growth, a key consumption barometer, weakened to 5.1 from March’s 5.9 per cent increase, which lagged economists’ forecasts. The surprising uptick in industrial production suggested that China was able to avert a significant slowdown at the start of the U.S.-sparked trade war in April. However, the decline in retail sales growth reinforced the view of many economists that China’s government must roll out more spending incentives to bolster consumer confidence. (4)
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable, but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
4-Cylinder Engines Today Are as Powerful as V8s Were in 2001, Sean Tucker, Kelley Blue Book, March 15, 2024
Concentrated vs. Diversified Portfolios, J.B. Maverick, Investopedia, November 7, 2024
TSX's weekly winning streak ends as investors consolidate recent gains, Fergal Smith, Reuters, May 23, 2025
Global markets weekly update - Trump administration proposes new tariffs on EU, T. Rowe Price, May 23, 2025
SUBSCRIBE
If you’d like to automatically receive the Weekly Market Update by email, enter your email address in the box below.
We respect your privacy, and you can always remove yourself from the mailing at any time.
Looking to Learn?
If you want to know more about some of the topics we wrote about this week, just click on the links below:
What Is Diversification? Definition as Investing Strategy
Concentration vs. Diversification: A Dive into Stock Market Strategies