Navigating Market Uncertainty

The situation in the globe today is most interesting to study and interpret as there is no historical precedence to assist us with forecasting probable outcomes. Markets do not like uncertainty or chaos, and we are absolutely pushing the boundaries on both these concerns. The flip flop of tariff on/off compounds this uncertainty. Corporations are struggling to find direction and make forward investment decisions to enhance their earnings and growth.

A large persistent tariff is recessionary for Canada given that US exports constitute nearly a fifth of Canada’s GDP and Canada is struggling with the aftereffects of an interest rate shock, rising unemployment, and declining real GDP per capita. It remains to be seen what tariffs may be long-term, and what may be negotiated. We are monitoring this daily.

What I do find positive is that while the market has pulled back, it is not an extreme pullback, assisting us to have some guarded optimism. In general, portfolio values are around their value of December, so we have maintained a neutral position over the last few months.

We remain engaged and committed to our process of selection of investments. We want to be business owners of companies we currently own over the next few years as they pay healthy dividends, are industry leading, well managed with strong earnings and respectful balance sheets. The volatility will persist until certainty of global events and concern for a ‘Trumpcession’ is minimized.

Most of the portfolio holdings are not directly affected by tariffs as we focus on companies that are more “service” or “real estate” oriented. There are exceptions to this general statement, but we remain well diversified.

In my view, with uncertainties elevated, it is very prudent for any client requiring funds within three years to be out of the market in a less volatile area such as daily Interest, GIC’s, lower duration bonds or quality preferred shares. We are happy to have a discussion with clients that need to validate their liquidity needs. While we remain optimistic on better globally cooperative decisions ahead, we need to follow one of my quirky sayings that we need to be prepared to be wrong in the short term. If liquidity is in your plan, lets chat.