Overview
- Office Update
- Portfolio and Market Performance
- U.S. Tariffs
- Earnings
- U.S. and Canadian Economics
- Market Outlook
Office Update
The majority of tax slips should be issued by Friday, March 7, and you should start receiving them in the following weeks.
U.S. Tariffs
The U.S. imposed a 25% tariff on goods entering the U.S. from Canada and Mexico, with a 10% tariff on energy, which is mostly oil. They also added an additional 10% tariff on Chinese goods, bringing that tariff up to 20%. All parties have announced reciprocal tariffs.
While hurtful to Canada economically, the move is politically positive for the Liberals, who had come off a disastrous December budget and the resignation of Prime Minister Justin Trudeau at about a 20% approval rating. With this new economic threat from President Donald Trump and the election of Mark Carney as the new leader of the Liberal party, March 9, the Liberals have gained in the polls and could call for a federal election.
While the Liberals have gained ground the last month, the Conservatives are still favoured to win an election in both polling (CBC 74%) and betting markets (Polymarket 56%) but their lead has diminished with Trump serving as a major distraction from the issues that had previously made the Liberals so unpopular. With the Americans knowing there is uncertainty under both Trudeau and Carney, we may need to wait until after the results of a federal election before we can get a negotiated trade deal with the US. It is widely expected that Mark Carney will call for an election before Parliament resumes later this month.
What industries are at risk in Canada? What stocks could be affected?
We see added risks to Canadian banks and insurance companies, as there are huge regulatory and tax protections currently in place. Our banks also have the additional pressure of the economy on their business.
Trump has brought up the Canadian banking industry several times now as a protected industry he wants to see American firms able to compete in.
Another big area at risk is steel, aluminum, and auto manufacturing. This area is an obvious target as it also comes with a political win for Trump, shifting votes from the unions away from the Democrats.
A third area is tech, media, and broadcasting. A target will be the digital services tax and other measures Canada has applied against Google, Amazon, and Facebook.
There is also, of course, dairy, poultry, and lumber, which have been a point of complaint for decades as we have very large tariffs and controls on these industries.
Fundamentally, we have a political divergence between Canada and the U.S. The majority of the U.S. population is supportive of what Trump is doing. He has a very high approval rating and some of his policies are in the 60-70% approval camp.
In Canada, the dislike of Trump and the U.S. has spiked massively, while the popularity of the Liberals is spiking in concert with this.
We expect this divergence in perspectives, largely caused by politicians and the media, will reach a peak at some point and converge back again. We should all keep a level head in the meantime.
From our perspective, it appears the Liberals are in no hurry to resolve their disagreements with the U.S. This trade war is a great distraction. Before, the Liberals were polling around 20%, just came off a disastrous budget, and were up for a vote of no confidence. The current situation and change in leadership have given them an opening to somewhat reset the political landscape.
Earnings
NVIDIA reported their fourth quarter earnings last Wednesday, which was one of the most highly anticipated markets even this past month. The numbers were great, beating both expectations for revenue and earnings with 114% growth for the year. The stock, however, has traded down since announcing, regardless of its stellar fundamentals as the market has sold off.
Like many names, the company has been trading on political fears, both the spectre of tariffs, and the potential of further trade restrictions to China. Three people were arrested for fraud in Singapore this week; they had lied about their uses of NVIDIA chips, and it is suspected they instead shipped the chips to China. The fear is there could be further security restrictions against chip exports going forward.
Another major earnings event we were watching is the Canadian banks, who reported their earnings last week. It was largely overshadowed by the trade disputes with the U.S.
RBC had great numbers, with a bump in personal and commercial banking from their purchase of HSBC. Their loan loss provisions did tick up, though, which is to be expected with a weakening economy.
TD had okay numbers but is still operating under an asset cap on the U.S. side because of their money laundering scandal last year, which is hurting their U.S. business.
BNS had mediocre performance with loan losses increasing and took an impairment charge for their Latin American operations.
BMO had a blowout quarter, beating net income and earnings expectations along with much lower loan loss provisions. Essentially, they have recovered from being one of the lowest performing banks. Expectations were low.
Both CIBC and National Bank had decent quarters with no major standouts.
U.S. and Canadian Economics
The Canadian dollar remains weak at 1.44 or 0.69 cents.
Canadian five-year bonds are now yielding about 2.5%, whereas U.S. five-year bonds are yielding 4%. Yields are coming down, meaning mortgage costs and lending costs are decreasing.
Again, ignore the fear and anger being peddled in the media. We will land on our feet and likely be in a better position a few years from now. Hatred is not healthy, especially when it is being manufactured by politicians and news outlets. Do not get drawn in. There is a lot to feel positive about over the longer term.
In three months, we will have a new government in place and likely have more economic certainty. Major changes happening in the U.S. will be larger at the start, because that is the time when the most must be done before you start losing momentum. By summer 2026, the pace should slow and normalize.
With all this uncertainty, what is positive?
- Interest rates and longer-term lending rates are coming down, bringing mortgage costs down.
- Government waste and bureaucracy is in decline, increasing the efficiency of the entire economy.
- Taxes are in decline, which should increase the velocity of spending.
- Oil and energy prices are in decline, which affects everything from food prices to consumer spending.
All of this is hugely positive going forward.
Regardless of your feelings on Trump, the more popular policies he has been winning support on are setting the political agenda here in Canada and around the world. For example, we now see both the Conservatives and Liberals talking about cutting government waste, reducing regulation, and balancing the budget. We see countries reversing their open border policies and mass immigration stance in the last year. We are seeing an increase in nationalism and a “my country first” approach, and an end to the era of globalism.
We had said it would be volatile this year and we expect to see more volatility in the months to come.
Market Outlook
We still expect volatility for the first six months of 2025, then improvement towards the second half of 2025. Expect further 5-15% swings up and down through the year.
Market timing will be very difficult–being invested over the longer term is what matters.
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Enjoy the first signs of spring, and remember, ignore the media hype!
Simon & Michael
Simon Hale, CIM®, CSWP, FCSI®
Senior Wealth Advisor,
Portfolio Manager,
Wellington-Altus Private Wealth
Michael Hale, CIM®
Portfolio Manager
Senior Wealth Advisor,
Wellington-Altus Private Wealth
Hale Investment Group
1250 René-Lévesque Blvd. West, Suite 4200
Montreal, QC H3B 4W8
Tel: 514 819-0045
Returns for the Conservative Equity Portfolio, Diversified Income Portfolio and Focused Total Return Portfolio represent the returns of model portfolios only and do not represent the returns of any client. Individual account performance may differ materially from the representative performance history, due to factors including but not limited to an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, trade execution timing and pricing, foreign exchange rates, and fees and other costs. This is not an official statement from Wellington-Altus Private Wealth (“WAPW”). WAPW cannot verify the accuracy of these performance numbers. Please refer to your official WAPW statement for your specific performance numbers.
