Good Evening Readers,

 

Markets we’re green in January and portfolios performed well. Our Paper Portfolio had a notable outperformance, as our balanced model (+3.2%) kept up with the high flying equity indices in January.

 

23 of 29 positions had positive returns, with our top contributors far outpacing the few detractors.

Gold, China, and International positions outperformed. We also benefitted from our USD exposure.

 

Just as important, we had reduced exposure to the markets biggest drag – Chipmakers. The emergence of DeepSeek and threat of tariffs were and double whammy.

 

Alas the value we add is by looking forward and discussing what we’re doing, not relishing on the past and what we did yesterday.

 

Portfolio Changes

• We’re adding Brookfield Renewable (BEP-U) and Fortis (FTS) to the paper portfolio, while removing Dollarama (DOL) and NextEra Energy (NEE).
• We’re rebalancing our allocation to stocks and bonds back to 50/50
  • To get granular, there’s a 3% position in Gold Bullion, so it’s 48.5/48.5/3
  • I’d prefer to let our individual winners run (NTR, BABA, ACN, T, SHOP, DXAU, etc.), we’ll reduce our positions in our 3 equity funds to top up our stocks in the red (CAR-UN, CCO, ATCO,) and top up fixed income.

 

 

Trade War 2025

 

Tariffs were on, then delayed. Trump took a victory lap. Called it.

• For an excellent summary, Andrew Chang’s recent piece is a must watch I highly encourage.
• Trump's tariffs: What's the endgame? | About That | CBC.ca

 

If you spend your Friday afternoon’s watching the business channel, markets sold off into the weekend. Monday morning looked worse until the news broke of a 30 day pause.

 

Will we get Tariff’s in 30 days and replay this episode all over again?

 

I truly hope not, and Mr. Market’s quick recovery shows he doesn’t think it will happen.

 

Looking at the market’s reaction to the possibility of a Trade war Friday afternoon and Monday morning, here’s what stood out.

 

Stocks that were hardest hit:

• Industrial REITS
• Industrials, particularly rails (i.e. CP) and companies with large production in Mexico/Canada
• Banks, particularly those with the most Canadian and Mexican exposure (CM, BNS)
• US Interest rates rose – poor for bonds

 

Initial winners

• The US dollar jumped, benefitting any US positions
• Canadian interest rates tanked – Canadian bonds were up nice
• Gold shot up
• The most united I’ve seen Canadians and their politics in years

 

From this brief reaction – here’s a few notes for if you were to try and position a portfolio that would withstand a trade war:

 

• Focus on services, avoid goods
  • Things moving across borders get tariffed
    • Nobody was worried their monthly Netflix or Shopify subscriptions were going up
    • Dollarama imports a lot, and they don’t get discount tariffs for being a discount store
    • Canadian Utility companies distribute the majority of their power to Canadians, they have limited risks in a trade war

 

• Take less risk with US bonds, safer to extend risk with CAD bonds
  • Look to shorter durations for US bonds so you can benefit from a week Loonie, and limit risk from rising rates
  • Safer to extend duration for Canadian Bonds, a decline in rates has an increasing boost for longer term bonds

 

 

Ultimately, trying to keep up with the short term swings of headline news is exhausting an impossible. One can’t possibly trade it.

 

We’ll stick to our guns, invest in quality, react to policy, and tune out the politics.

 

Residential REITS and Utilities look to be bottoming and in early uptrends. Resilience to a trade war is just the icing on the cake.

 

Important Dates and Notes – Your Guide to 2024 Tax Reporting

Here’s a guide from RBC for your 2024 Tax Reporting and a few notes from me

- Tax reporting guide – RBC Wealth Management

- As documents are finalized, we’ll be sending out tax packages directly to you

- You can access these at any time through our online access

- Any questions – let me know!

Important dates

March 3, 2025 – last day for 2024 RRSP contributions.

April 30, 2025 – last day to file your 2024 tax return without penalty.

June 15, 2025 – last day to file your 2024 tax return without penalty if you are self-employed.

Access your tax slips online by logging in to RBC Wealth Management Online

As always, If you have any questions or comments – let me know!
​
Much love to you and yours,
​
Lucas

 

About the Paper Portfolio – Balanced Model

The Paper Portfolio is a model and NOT a real investment account. For any readers interested in a full list of positions and/or Monthly Performance, they are available upon request. No individual should act on this as investment advice, please consult a professional. The Paper Portfolio does not take into consideration taxes, or income requirements.