The Markets
The TSX is up 5.7% for November and up 21.9% year to date.
The S&P 500 is up 5.1% in November and up 25.8% year to date.
The NASDAQ is up 5.3% in November and up 27% year to date.
From our Portfolio Advisory Group (as of Nov 29, 2024)
North American equity markets are flirting with new highs, even as the incoming U.S. administration introduced fresh uncertainty. President-elect Donald Trump recently proposed sweeping tariffs: 25% on imports from Canada and Mexico and an additional 10% on Chinese goods.
Countries generally use tariffs to protect domestic industries by raising the cost of imports and encouraging consumption of locally produced goods. Tariffs also provide a source of government revenue. However, in practice, the benefits to the country imposing the tariff are often offset by several forces. Domestic businesses that rely on foreign inputs to produce their own goods may face higher costs, and retaliatory tariffs can harm exporting industries. Ultimately, consumers usually bear the brunt of the costs through higher prices. One relevant example is oil. Oil accounts for nearly a third of Canada’s exports to the U.S., and energy makes up a significant portion of the Canadian equity market. If implemented, tariffs could hurt the Canadian economy and its stock market. However, Canadian oil represents around 20% of U.S. oil consumption, and without clear alternatives, oil prices in the U.S. would likely rise, aggravating inflation-weary consumers.
The trade-offs of imposing tariffs, along with lessons from President Trump’s first term – when similar threats resulted in negotiated compromises – suggest this development may be part of an early negotiation strategy. Notably, President Trump proposed these tariffs with the explicit aim of pressuring Canada and Mexico to enhance their border security. In 2019, Trump threatened to escalate tariffs on Mexican imports unless the country took measures to curb illegal immigration. Mexico responded by deploying additional border troops, thereby avoiding the tariffs. A similar scenario may lie in front of us.
In line with this view, markets have largely shrugged off the tariff threats. The Canadian stock market has marched higher, while the Canadian dollar has pared back some of its losses following the announcement. Still, the Loonie remains near multi-year lows, reflecting stronger U.S. economic growth and expectations that U.S. interest rates will eventually settle at higher levels than in Canada.
Canadian equities proved resilient during President Trump’s first term despite the imposition of steel and aluminum tariffs. Between 2018 and 2019, Canadian stocks outperformed other non-U.S. developed markets, as tariff-exposed industries represented only a fraction of the market. The Canadian equity market may be more insulated from the impact of tariffs than its own economy. Sectors such as financial services, software, and food retail are not directly exposed to tariffs as they do not rely on physical exports. Moreover, an increasing number of Canadian companies that make up its stock market have diversified their businesses internationally, reducing their sensitivity to economic developments at home. This stands in contrast to the thousands of small and medium sized private businesses that make up its economy and may be more directly exposed to domestic issues in Canada.
In sum, while we do not view tariffs as an empty threat, we believe any impact may be less punitive than some may expect. Nevertheless, this development has served as an early reminder that the new U.S. administration may introduce greater unpredictability, potentially adding to market volatility from time to time. This may create risks to consider going forward but can also create opportunities as short-term dislocations arise. We will be on guard for both as we move into 2025 and beyond.
Wealth Management
It’s year end and I have attached our article on year-end tax planning.
In the Community
I attended an event at Ontario Shores in November which was put on by the Women’s Brain Health Institute. It was a very interesting and informative evening where Dr. Amer Burhan and Lynn Posluns from the Women’s Brain Health talked about dementia/Alzheimers and how 70% of the cases affect women. There has been little research done specifically for women. They provided some prevention tips which are common to a healthy lifestyle; exercise, diet, quality sleep, don’t smoke, have a good network of friends and family, continue to learn and challenge your brain.
Our office is sponsoring two families this Christmas through Simcoe Hall Settlement House in Oshawa. We are fortunate that we have caring staff who donate to this fundraiser.
Team News
Our office will be closing at 12 noon on Dec 24th and we will be closed on Dec 25th and 26th. We will be closing early on Dec 31st. Kim will be taking a day or two off over the holidays to spend with her family. My sons will be coming home for Christmas and we look forward to being together for a few days and celebrating the season.
It’s been an outstanding year on the markets; I send this email to clients who invest with me, it doesn’t go unnoticed on the trust you have with me with your savings and I’m pleased that everyone’s portfolios grew substantially this year; I don’t take this responsibility lightly.
Thank you for your trust.
I wish everyone a safe and happy holiday season and a prosperous & healthy 2025.