To my clients:
It was a mixed week for North American stock markets with the Canadian TSX finishing down 3.7%; the U.S. Dow Jones Index down 0.4%; and the U.S. S&P 500 up 0.3%.
As one will see from the index returns above, Canada’s market significantly underperformed this week. In fact, nearly all of the Canadian losses came today, and were largely driven by precipitous declines in precious metal prices – notably gold and silver. Both precious metals have been on a major two year up-trend which led to Canadian market outperformance in 2025. But discretionary clients do not own gold or silver. Why? Because, similar to cryptocurrencies like bitcoin, “value” largely lies in what investors “think” these monetary replacements are worth, but there is little tangible worth outside of these estimations. Should the dominant fiat currencies of the world (i.e. USD, Euro, Yen etc.) collapse and consumers start paying for groceries with a gram or two of gold dust, then yes, tangible value can be had. However, I’ve been hearing about the death of fiat currencies my entire 28-year career (and even the decades before that), and I’ve yet to see these dire predictions come to fruition. Might it happened some day? Sure. But in the meantime, I’ve learned to prefer investments that produce actual economic benefits, like large-capitalized dividend-paying stocks that comprise the vast majority of client portfolios. While it’s nice to be on the right side of speculative gold trades when they are working, its nonetheless the case that the ride up is comparable to riding an escalator, whereas the ride down can feel like the vertical drop of an elevator. Today is such a day and I’m glad I and my clients are not taking the elevator down.
The other big news of the past 24 hours is Donald Trump’s nomination/pick of Kevin Warsh as the next Federal Reserve Chair when current Chairman Jerome Powell’s term expires this Spring. Despite recently being viewed as a Trumpian sycophant, Mr. Warsh’s history and career as a Fed governor reveals a man with credibility and experience (most notably during the 2008 financial crisis), and one who has long been respected as a creative thought leader with respect to monetary policy. Interestingly, despite Warsh’s current belief that policy rates are too high and up to 0.50% in rate cuts could be made in short order, his longer-term bias has been “hawkish” which is industry-speak for policy makers whose prefernces skew toward higher rates. Big picture, Warsh’s nomination might be considered a well-balanced choice. Certainly reaction has been generally positive from both the political left and right. We shall see if his nomination is confirmed and, if so, how his upcoming tenure might play out.
Last point this week is that corporate earnings continue to come in above expectations – especially the earnings of the Mag 7 (ex Tesla). Microsoft, Meta and Apple all reported earnings (and revenue) well ahead of estimates. While reaction to these solid earnings was mixed (Meta stock surged, Microsoft stock plunged, while Apple stock took a more sedate path higher), I’d not get caught up too much in these immediate market reactions. Rather, I’d focus on the collective positive trend and be comforted that this trend offers justification for broader stock market valuations – a point I have made previously in these weekly missives as well as my quarterly client letter to discretionary clients. I’d also point out that in the specific case of Meta, it’s recent expenditures on AI data centers seem to be paying off as there is a concomitant rise in revenue also taking hold. Yes, the expenditures are huge (in the case of Meta estimated at between $115 to $135 billion dollars in 2026) but so too are the growing revenues such that bottom line earnings are accelerating.
That’s it for this week. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
RBC Dominion Securities Inc. │ Tel: 604.257.7569
2950 Glen Drive, 7th Floor │ Coquitlam, BC │ V3B 0J1
Toll Free: 1.844.665.9900 │Email: nick.scholte@rbc.com
Visit Our Website: www.nickscholte.ca
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