“Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security” – John Allen Paulos
To say we are currently living in an age of uncertainty and chaos is an understatement to say the least! If we are not careful, this uncertainty allows many of us to think the unthinkable, and to automatically think of the worst-case scenario. The question we are often asking ourselves these days is: how can we as investors, not only learn to navigate this brave new world of hyper fast change, but prosper from it?
With uncertainty you can try to see patterns and trends, assess risk probabilities and plan accordingly. With chaos, you can’t.
In times of chaos, sometimes the best approach is to wait for the dust to settle. Our greatest assets during these periods are discipline and patience. Eventually, from the chaos, patterns and trends will emerge, bringing with them a sense of certainty. It is then that we can begin to see some degree of clarity and predictability return.
The ancient adage: “From any crisis there will be opportunities” is a great reminder for this period, as we need to recalibrate some of our ideas and beliefs towards what will be good investments going forward and not just focusing on the investments that worked in the past. While financial basics do not change and will always serve as the core of your investment and financial plan, I urge you to look again at traditional and new sectors for income and growth as they fit into this new economic and investment paradigm.
Energy
The world needs it. Period. Artificial Intelligence (AI) is coming and it needs a lot of energy. Canada is well positioned to be once again an energy superpower, and our future prosperity may depend on it. The energy conversation is moving away from what we’ve seen previously, where renewables were the primary media and political focus for western countries. We feel that all energy production will be at the table, including building pipelines, expanding refining capacity, and pushing back against policies that handicap Canada’s ability to compete on the world stage. While many Canadians, including the Mark Carney government, now talk of increasing investments in our traditional energy sectors, all of this will take time. It takes five to ten years to get pipelines or mines up and running. In the meantime, renewables may be the best shorter-term solution.
Many private utility companies offer a more conservative play on this. They offer income-oriented investors the opportunity to access a growing sector while enjoying dividends.
Uranium will continue to be in demand and Canada happens to have a lot of it. Cameco is our preferred company to maintain exposure. Since it does not offer a dividend, this would fit into the growth portion of an investor’s portfolio.
Well-established renewable companies like Brookfield Renewable Partners or Northland Power are two of many opportunities to enjoy dividends and longer-term growth
Recall, that as the interest you receive from savings accounts and GICs decreases as the Bank of Canada lowers rates, these dividend investments with their relatively higher yields will look more attractive. This may mean that over time their prices will increase. As the equity markets sells off, these securities’ current yields increase – making them even more attractive to the discerning investor.
While many focus on the negatives associated with increasing trade friction, innovation and technological progress will continue regardless. AI related innovation will continue with or without trade wars. Advances in robotics continues at a fiery pace. The race for new and yet to be discovered tech continues. As already mentioned, new forms of energy development will continue. While I truly hope Canada and our leaders see the need to encourage our own home-grown advances in these exciting new sectors, opportunities currently exist around the globe that we, as investors we can participate in.
Banks and Telecoms
Tariffs may be just the first blow of a prolonged fight over U.S. access to our markets. Regulated sectors such as banks and telecoms are currently in the crosshairs of our southern trading partners. Many in the Trump administration have made in clear that these regulated markets are on the table in any future trade negotiations. Banks and telecoms may therefore be vulnerable. We feel now may be an appropriate time to rebalance if your portfolio has become overweighted towards these sectors.
Gold
As many of you may know, gold and Drew don’t usually get along very well. Whenever we’ve have ventured into buying this precious commodity during a previous crisis, we have usually left our partnership on a less than good note. Is this time different? As the U.S. reshapes global and economic norms, investors worldwide question the longer-term validity of the view that the U.S. currency is a basis of secure value. Since WWII, the U.S. dollar has been one of the default “asset classes” during times of turmoil. This may now be changing. Enter gold. Gold may to some degree replace the U.S. as a haven during these tumultuous times. We’re not saying to pile all in on this! Despite its historic perception as a store of value, Gold is currently trading as a riskier investment. Consider a 2-5% allocation if your risk tolerance allows for it.
Bonds
Bonds are a type of debt instrument that allows you, as the bondholder, to lend money in exchange for regular interest payments over a specified period. During times of uncertainty, many investors turn to bonds as a stable income source, providing a buffer against the volatility of equity markets. This increased demand for bonds can drive their prices up, offering a dual benefit: earning interest and potentially profiting from rising bond market prices. If you haven’t already considered bonds, please reach out to us to discuss this option.
As investors, we need to hold steady in our belief that at some point the markets will price in much of any current and future uncertainty. Calm will return to the markets. Companies will again announce positive earnings. This is when the market will begin the inevitable climb back up to new highs.
While the world continues to change at what seems an ever-increasing pace, maintaining a balanced perspective in terms of concern over shorter-term changes in your portfolio and being aware and prepared to benefit from future opportunities is crucial to not only staying sane but sustaining longer-term, positive returns.
Stay Calm and Stay Invested!
– Drew and Cameron
*Quote by American mathematician and Temple University professor John Allen Paulos (1945 – ). The quote is found in his 2003 book “A Mathematician Plays the Stock Market” where he is referencing something told to him by his father.
