Highlights

• Last reminder for RRSP contribution
• Current Economic Outlook
• Our investment strategy

 

 

RRSP & TFSA contribution reminder

 

• RRSP: The last day to contribute for the 2024 fiscal year is Monday, March 3rd, 2025. For the 2024 tax year, the contribution limit is 18% of your earned income, up to a maximum of $31,560, minus the pension adjustment, if applicable. The maximum for 2025 is $32,490.

 

 

Current Economic Outlook

 

As always, investors need to deal with risk and uncertainty. Nevertheless, the anxiety felt throughout the first few months of this year has admittedly felt more intense than normal. The threat of tariffs, a surprise development in artificial intelligence, higher U.S. inflation, and a major shift in U.S. policy with respect to the war in Ukraine are just a few of the challenges that investors have faced this year. But, global equity markets have been resilient in the face of these issues and are up year-to-date. Moreover, government bond yields are close to same levels they were at to begin the year, and the beleaguered Canadian dollar has shown signs of life, strengthening recently.

 

Tariffs are at the forefront of everybody’s mind. Despite many threats, the U.S. government has undertaken only one action so far: an additional 10% tax on Chinese imports (the U.S. had pre-existing tariffs on Chinese goods). Yet, the risk of new tariffs remains: the U.S. is expected to revisit its plans for Mexico and Canada in early March, it is planning tariffs on all steel and aluminum imports later next month, and it seems tempted to bring Europe into its crosshairs in the not-too-distant future. Still, markets have thus far taken the view that the worst-case scenario – wide ranging tariffs expected to be enacted over a month ago – has already been avoided. Instead, delays, extensions, more targeted tariffs, and exceptions have emerged as the strategy so far. Should this persist, the approach seems consistent with what we experienced during President Trump’s first term in office.

 

On the artificial intelligence front, a Chinese company, DeepSeek, unveiled an AI model that demonstrated impressive performance relative to leading models developed in the U.S. It quickly surpassed OpenAI’s ChaptGPT as the most downloaded application on Apple’s App Store. The company suggested it was able to develop its AI model at a fraction of the cost of U.S. models. Moreover, it succeeded despite significant constraints as the U.S. government had restricted its ability (due to its status as a Chinese company) to access some of the world’s most powerful chips. It served as a reminder that innovation is alive and well in China. It also raised more questions around the significant amounts of capital that continue to be deployed by U.S. technology firms, leading to some volatility in the tech space. Given elevated valuations of tech stocks that continue to reflect high expectations and the level of concentration of the tech sector within the U.S. market, we expect developments in AI to remain very important for the U.S. market.

 

Another challenge investors had to grapple with recently was the U.S. inflation rate for the month of January. It was higher than expected and the breadth of inflationary pressures also widened, suggesting a broader range of goods and services are experiencing pricing pressures. While it is only one month’s worth of data, investors will undoubtedly be watching to see if these pressures persist over the months to come. These concerns were echoed by members of the U.S. Federal Reserve who suggested they are reluctant to lower interest rates any more until further progress on inflation is made.

 

Global equities have performed well despite these headlines, suggesting that markets are looking past the noise and continue to have confidence in the earnings growth potential over the next few years. However, we do not think investors should become complacent regarding the market’s resilience. We continue to watch for additional signs corroborating the market’s strength. One such indicator is rising market breadth, which would suggest that an increasing number of stocks are reaching new heights. Such a trend would help confirm that the bull market for stocks continues to be on solid footing.

 

 

Our investment strategy

 

As mentioned in our Special bulletin: Tariffs published on February 5th, our game plan remains the same.

 

Although the inciting circumstances are new, the crisis we are currently experiencing is similar to many others: recessions, the tech bubble, the subprime crisis and the pandemic to name just a few. In such cases, we continue to focus on protecting portfolios by promoting:

 

•          A long-term vision

•          The quality of investments in the portfolio

•          Sectoral and geographical diversification

•          Stocks with growing dividends

•          Liquidity to take advantage of opportunities

 

In what is likely to be a volatile period for Canadian equity portfolios, we believe maintaining a disciplined investment strategy focused on the long term while avoiding knee-jerk reactions to day-to-day headlines is the most prudent approach. Diversifying across a range of high-quality companies with durable business models, resilient cash flows, and strong balance sheets provides an effective defense against any trade policy shocks to come, in our view. Firms with these characteristics are typically well-equipped to navigate more challenging operating environments and adapt to economic shocks.

 

If unexpected changes occur, we will approach them calmly and analytically. Indeed, there is unfortunately no magic solution and hasty emotional decisions are to be avoided. We will continue to monitor the situation carefully in order to act diligently – applying these strategies that we may weather this volatility and, above all, take advantage of any opportunities that will arise.

 

 

"We must react rationally. Show firmness as well as pride.

We cannot accept being treated with disrespect. We must set the record straight.

We must have confidence in the common sense of Americans, in their sense of fairness.”

 

- Lucien Bouchard, Lawyer and retired politician

 

 

Our priority is to preserve your capital over the long term, while remaining well-positioned to benefit from sufficient returns to meet your personal objectives, and without taking unnecessary risk.

 

As always, we are available to answer your questions.

 

 

Benoit Legros, B.A.A., CIM, FCSI

Senior Portfolio Manager and Wealth Advisor