02/06/2025
Sharing an email delivered to clients keeping them informed on what recent market events mean to Canada and to our economy. It summarizes recent developments related to potential U.S. tariffs on Canadian goods, highlights what this means for Canada, and reminds clients that short-term market fluctuations are a normal part of investing.
An informed client is a healthy client 💕
~ I hope you’re doing well. I wanted to reach out to share some perspective on the evolving trade environment and how these developments may affect your investment portfolio. While the headlines can be unsettling, it’s important to remain focused on the bigger picture.
Recent developments
President Trump’s new tariff threats have now been delayed. Had they been enacted, they could have prompted a faster-than-expected rise in inflation in the U.S., potentially leading to higher prices for housing, food, energy and automobiles.
At present, the markets haven’t shown a significant downturn, which suggests that investors, for now, do not see an immediate reason to panic. In addition, earnings season is still underway and going quite well, indicating that many companies continue to perform strongly despite trade headlines.
What it means for Canada
Exports to the U.S. represent around 76% of Canada’s total exports, accounting for almost 20% of our GDP. Even though the Bank of Canada forecasts GDP growth of 1.8% for 2025 (excluding any negative effect from tariffs), there is a risk that higher tariffs could reduce overall economic activity.
This, in turn, could prompt the Bank of Canada to cut interest rates to support growth, potentially reducing the Canadian dollar’s value.
Investment implications
Equities: the team continues to favour Canadian, international and emerging market equities, where fiscal or monetary easing is more likely. These markets present attractive opportunities, particularly in value-oriented segments.
U.S. equities: although the U.S. market remains robust, valuations are high, which can make for a more challenging environment. Its economy, however, is the strongest in the world.
Fixed income: bonds continue to offer mid-single-digit yields and the potential for price appreciation. Additionally, if the Canadian dollar weakens, U.S.-denominated bonds could become even more appealing.
In short, the new tariffs and possible retaliatory measures would introduce inflationary pressures, equity volatility risks and some recessionary risk for Canada. However, the delay in Canadian tariffs may temporarily ease immediate pressures, and we’ll be watching closely as the situation unfolds over the next several weeks and beyond.
Staying calm and focused
Despite the ongoing headlines, the markets are not signaling a large-scale concern at this time, and the current earnings season has reinforced the belief that many companies remain in good financial shape. We’ll likely revisit these trade discussions in another 30 days — and this cycle of negotiation could continue over the next four years — so it’s essential to stay patient and keep your long-term goals in mind.
Remember that short-term market fluctuations are a normal part of investing. Our team is dedicated to helping you navigate these periods of uncertainty and make informed decisions aligned with your financial objectives.
Above all, please avoid making hasty changes to your portfolio. Our strategy is designed to weather various market conditions, and we’re here to provide you with any guidance and support you may need.
If you have any questions or would like to discuss your portfolio, feel free to reach out to me directly. Thank you for your continued trust and confidence in our services.
Best regards,
Colleen Gray
(250) 715- 6321
[email protected]
*2024 The Big Picture for long-term investment planning added for attention.
*2025 will be available soon. Let me know if you'd like a copy.
My favorite visual showcasing market history. If you've seen me, you've seen this!
