Blog for Friday, May 16th, 2025
Welcoming a new team member, economic outlook, and what was I thinking?
The Toronto Maple Leafs?!?!?! I have no further comment out of frustration. Same with the Winnipeg Jets although they played great last night.
I have lots to chat about in this blog so here goes…
I would like to welcome Mark Gendy to our team. Mark is a graduate of the Commerce program at Ontario Tech University and will be focused on the admin side of our business. He is a very bright young man with incredible computer skills, an interest in the markets, and some experience in wealth management from a recent stint with a competitor. He is an accomplished tenor sax player, enjoys R&B and soul music, and is a regular volunteer at his church. Mark’s family is from Egypt and visits there regularly, so if anyone needs some travel input to the country, give him a call. Welcome aboard Mark!
I am not sure what Denise, Addison and I were thinking on Mother’s Day. We all got up at 5:30 am and trekked downtown Toronto to run the Sporting Life 10 km race. The only issue for Denise and me is that we had not trained nearly enough to be participating in any 10km race. Addison doesn’t fall into this camp as she is a teenager and is fit from running endless kms for the high school ultimate frisbee team. Other than three days of recovery we did okay. Addison finished in an hour, Denise in 66 mins and I came in under 50 minutes. Not bad for an old guy. I ended up in the top 20% of all runners and top 10% in my masters age group. My total time was up from 44 minutes when I ran the race a decade ago. I will still call this one a win.
I am thinking about doing a 60 km cycle road ride next weekend for charity. This is also crazy as it will likely take me 2.5 hours and I haven’t been on anything but the Peloton for more than 30 mins at a time. Not sure what I am trying to prove to myself. Maybe it is that I can still do all this stuff even at 60 years old.
Denise and I attended the Oshawa Parkwood Rotary Club’s annual reverse draw this past week. I was surprised to receive a Paul Harris Fellowship award from the club for contribution and service to the community. I have been sponsoring the event for a number of years and it was a nice surprise to be recognized.
Addison makes her big debut in her high school musical adaption of Mama Mia in two weeks. She has the lead role of Sophie and has a lot of lines and songs to sign solo. I am already nervous for her and I am sure she is going to be great. She has certainly been practicing a lot.
I recently attended a couple of economic update breakfasts. The reality is that no one knows where the global economy is going with Trump in power. It was nice to get out of the office and away from the news. Here are some of the take aways…
For the outlook for the USA, the key point that came up is that stagflation is going to be an issue in the coming months. Tariffs will drive costs up for US consumers and growth is slowing, which will lead to stagflation. Growth is expected to decline to near zero with a 40% chance forecast for a recession. No one likes to talk about stagflation as it is a very hard economic situation to manage.
This causes some problems for the Federal Reserve as any interest rate cuts are going to help growth yet in turn may stoke inflation further. They will be hard pressed to manage both sides of this situation. Depite the challenges with stagflation, experts are calling for two or three, quarter point cuts possibly beginning this July.
US consumer and business angst is growing over concerns for the economy, employment outlook, and price increases. Confidence is on the decline, even with Republican supporters. This lack of confidence may already be leading to a slowdown as individuals curtail their spending on goods and services due to the uncertain economic environment.
Economic data has been relatively good as of late. I think the reason is that companies have built their inventories of supplies ahead of the tariffs and consumers have brought forward purchases before the tariffs hit. Eventually supplies and consumer demand are going to decline, and prices are bound to go up. The economic data may start to show a softening in the next quarter or two.
Trump is looking to make big tax cuts south of the (arbitrarily) drawn border and to fund it with tariffs. There is some push back as some of the tax cut may be born out in higher USA debt. The deficit is already at 7% of GDP in the USA compared to 1.5% in Canada. This increase in deft to GDP may be a sticking point to getting the bill passed.
We will be watching the bond market reaction to any potential increase in the deficit. If there is one, the bond market will not like that and will likely sell off. We saw this happen a few years ago in the UK when the bond market sold off aggressively in the face of deep tax cuts by the Prime Minister at the expense of higher deficits. Tax cuts had to be walked back asap and she lost her position as Prime Minister.
Trump is keenly aware of equity and bond market impacts from the tariffs as we have seen a couple of times already this year. He has paused tariffs for 90 days twice – once for the world and once for China in order to give relief to the stock and bond markets.
As for Canada, we are likely going to experience a mild recession in the second half of the year. Unemployment is also likely to rise and top out at 7.2%. Inflation is much more subdued in Canada. The tariff inflation bump is being offset by lower oil prices and the removal of the carbon tax. This should allow for another two cuts to interest rates by the Bank of Canada.
Provincial and Federal government spending is going to focus on infrastructure projects to lay the groundwork for expansion of trade with other partners around the world. The USA will remain a big part of our trade, however, diversification of trading partners is front and center for our governments.
At the end of the day, the markets need policy and tariff stability. We know that we are never going back to the 2% effective tariff rate for the last few decades. It looks like a 10% tariff floor is likely going to be the new normal and it is going to take a while to get there.
This year is going to be messy with respect to the global economy as trade and tariff deals are negotiated. Growth should resume into 2026.
That’s about it. I am off to Collingwood to plant a few large trees on the property. A number of my jack pines have died off and have had to be cut down over the last few years, and I need to reforest. Thank goodness I love the gardens and doing things around the house as I expect it to be a lot of work.
Enjoy your weekend.
Miles…