As we prepare to send out our Q1 2025 Client Package, followed by our monthly strategy update, we wanted to take a moment to address recent market developments. Given the significant action over the past week, it’s important to assess what’s happening and what it could mean moving forward.
Understanding the Market Sell-Off
The recent market downturn has triggered a wave of reflection and debate. Morgan Housel, author of The Psychology of Money, captured the sentiment with a thought-provoking remark:
“Spoke to an investor who said, ‘If the market actually processes what happened yesterday, it would be down 30-40%. The fact that it’s not is either denial or a belief that it will soon be reversed.’”
This highlights a critical question: Is the market underestimating the significance of recent events, or is it betting on a swift resolution?
At first glance, the sell-off appears to be part of a broader strategic maneuver—potentially aimed at improving U.S. trade terms, weakening the dollar, and lowering domestic interest rates. However, the implications may be far more structural. We could be witnessing a fundamental shift in global trade dynamics, with consequences that extend well beyond short-term volatility.
Ian Bremmer of Eurasia Group drew a stark parallel:
“The British didn’t understand what Brexit meant for their economy. But they wanted it, they voted for it, and they’ve gotten it. Now it’s the Americans’ turn.”
This comparison serves as a cautionary reminder: policy choices, even when made with confidence, can lead to unintended economic consequences. As the dust settles, we may see which sectors or companies were overexposed—some may struggle under pressure, while others could emerge as new opportunities. Successfully navigating this environment will require caution, adaptability, and discipline.
Positioning Ahead of Uncertainty
Fortunately, we entered 2025 with a clear strategic framework in place, which we outlined in our February Market Strategy piece—our “Third-Period Trap Zone” approach:
“We liken today’s environment to entering the third period of a hockey game, where the first two periods were full of scoring, but now the opposing team is coming out swinging. This is not the time to take on unnecessary risk but rather to play a neutral zone trap—protecting gains while selectively striking at opportunities.”
In January and February, we were actively repositioning client portfolios and our TWC Risk-Managed Balanced Growth Fund in response to market developments, particularly taking advantage of the 30-day tariff reprieve:
- Reducing S&P 500 exposure – Given tariff risks impacting top tech holdings, we rotated out of large-cap tech and replaced it with a fully protected, costless covered call strategy on the Russell 2000, while also identifying attractively valued U.S. market segments, such as Berkshire Hathaway and owning the (put-spread, collar option strategy) Simplify Hedged Equity ETF (HEQT) that has protected half of the S&P 500’s loss in the past few weeks
- Canadian dividend exposure – our large weighting to the Outcome Canadian equity income fund has done an excellent job gaining 7.1% in the quarter with a 2.8% gain in March. The fund has continued to exhibit its defensive qualities during a challenging start to the month, falling only 0.4% through yesterday’s close.
- Energy sector adjustments – We locked in significant gains by reducing our long energy exposure by roughly 50%, reallocating into a U.S. dollar-denominated structured note with 40% downside protection and a potential 20% coupon if positive in a year. We executed a similar trade on Canadian pipeline and utility stocks, structuring it with 30% downside protection and an expected 14-15% coupon.
- Long dated 20-yr Treasury notes – we have a very large position in structured notes on the iShares 20+ Year Treasury Bond ETF (TLT) ETF that is really starting to kick in on this market sell off. These notes will generate some strong returns to offset the loss from our long position in equities.
The Challenge Ahead: Timing the Recovery
The real challenge now is timing the repositioning for the eventual recovery—a task made even more unpredictable with the ever-volatile wildcard that is President Donald Trump. His policy shifts could trigger rapid market swings at any moment.
That’s why we are exercising patience and humility. What may seem like an opportunity today could turn out to be a falling knife. Now is the time to remain disciplined and strategic, which means preserving capital while mapping our ways to ultimately positioning for the eventual recovery.
If you have any questions about market conditions, tariffs, our strategies or how your portfolio is positioned, please reach out to Craig or Martin. We remain committed to guiding you through this environment with clarity and confidence.
To find out more about the TriVest team and how we manage wealth, follow us on Twitter, LinkedIn or Facebook . Please email us if you want to find out more about our services.
The information contained herein has been provided for information purposes only. The information has been drawn from sources believed to be reliable. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Private Counsel Inc. (WAPC) does not guarantee the accuracy or completeness of the information contained herein, nor does WAPC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact your financial advisor.
All trademarks are the property of their respective owners.
© 2025, Wellington-Altus Private Counsel Inc. ALL RIGHTS RESERVED.
NO USE OR REPRODUCTION WITHOUT PERMISSION. www.wellington-altus.ca
