| A few topics our newsletter touches on this month:
Our Thoughts: What’s it Gonna Take?
Believe it or not, we are only in the month of March. Yet, it has been quite the year already given the policy shifts and turns undertaken by the U.S. administration. While many people, including ourselves, are “tariff-ed” out at this point, we discuss some of the early impacts from the trade war thus far, and what it might take to work our way out of this.
The series of rapid-fire developments and head spinning reversals has understandably put investors on edge. Sentiment towards Trumps economic agenda has gone from ebullient to uncertain; leading to a weakening in consumer and business confidence. That plus soft retail sales, the stumbling of AI stocks and a lowering of profit growth estimates have North American stock markets off to a weak start in March and taken back all of their stock markets return year to date (which were still solid at the end of February). International markets, on the other hand, have been performing well primarily reflecting European nations agreement to ramp up/ unleash spending on infrastructure and defense, and reduced exposure to the impact of Trump tariffs.
Notably, the U.S. stock market has underperformed other markets including those in Canada, Europe, and Asia. It is hard to completely rationalize this, given the US economy in theory is the least exposed to the impact on tariffs as it primarily sells to themselves. It may be attributable to the fact that U.S. stocks were quite expensive relative to others, which left them potentially more vulnerable to a “risk off” scenario. Historically speaking, investors typically look to reduce risk in their portfolios in an environment of heightened uncertainty, and expensive stocks can sometimes be an easy funding source.
The question for investors is: what’s next? It appears that a binary on or off outcome for tariffs is less likely and that tariffs in some form will be here for a while. Even without a full-on trade war, GDP growth estimates are being taken down. In Canada, expect several rate cuts beyond a 0.25% reduction this week to help stimulate GDP. It is likely the Canadian dollar will remain at the lower end of its trading range as well, increasing our export competitiveness. US GDP growth will also be negatively impacted, particularly so if there is ramp up in reciprocal tariffs. On both sides of the border the uncertainty will likely lead to a pause in hiring and capital investment. If all this results in lower approval ratings for Trump and the stock market stuck in the doldrums, that may be the recipe needed for the U.S., Mexico, and Canada to sit down and seek resolution through renegotiating the USMC Agreement. Meanwhile, we continue to review and assess our portfolios to ensure that our clients’ exposures are appropriate. If you have questions or wish to discuss your, please do not hesitate to reach out by e-mail or call 613-721-8928 to book a review with Mark, Peter or Sarah. By the numbers (February): The TSX was down 0.40% while the S&P 500 was down 1.30% in U.S. dollars (down 1.70% in $CAD). The Europe, Australia & Far East index (EAFE) was the leader up 1.40%, while the Emerging Markets index was down 0.10%. The Canadian bond market was up 1.10%.
Interesting Listening/Reading
Winter snapshot: Peter & Mark enjoying a ski day last month in Mont Tremblant, QC
Regards, Mark, Peter, Sarah, Corinne & Nathalie Gallivan Wealth Management |
