Markets have been roiled by politics. While politics normally interplays with markets, it is unusual to see the level of movement from one specific policy statement — namely, on tariffs. The S&P 500 was down about 15 per cent in three trading days after the reciprocal tariff announcement on April 2, then rebounded eight per cent after the reciprocal tariffs were delayed for three months. The Canadian market didn’t gyrate as much, but oil was hurt due to concerns of a worldwide economic slowdown caused by a trade war and the uncertainty created by daily changes in announcements.
On our side of the border, the re-election of the governing Liberals also sent a chill down the spine of at least one investor: me. As mentioned periodically over the past couple of years, I had been tilting back toward Canada after being heavily U.S.-focused for most of two decades. That tilt will now change, at least until the newly elected government demonstrates a change in direction and begins removing impediments to investing in Canada. My expectation is it will continue down the path of subsidizing industries it deems favourable, while impeding those it deems unfavourable. Both actions degrade the economy. I will take the wait-and-see approach.
So: what are my investing plans, given the volatility and my current unfavourable view toward both Canada and the U.S? While investing is always fraught with uncertainty, I have rarely been as uncertain as today. Before answering that question, let’s look at my approach so far this year, to provide some guidance.
Read Also
Oval Office intrigue drags on farm-level decisions
A rational family sitting down for a budget discussion should raise savings, reduce the risk those savings face when invested, and make a point to keep up with every twist and turn of emerging U.S. tariff and tax policy.
My 2025 predictions included only modest market returns while experiencing significant volatility. I was concerned with both valuation levels and the Trump factor.
Firstly, I delayed my 2025 TFSA (tax-free savings account) investment decisions. Normally I would make new contribution and dividend reinvestment decisions early in January. This year, I was waiting for a correction and made those decisions the week after the infamous reciprocal tariff day. Most of the money went to Canadian stocks, as there are no withholding taxes on dividends of Canadian companies in a TFSA. Additionally, I remained hopeful of an improving investment climate. I added three new companies to the TFSA portfolios, although they are in other portfolios: Canadian National Railway (TSX: CNR) and TFI International (TFII), as transportation stocks had been particularly hurt with the tariff announcements, and Northland Power (NPI). For the rest, I simply added to positions in Sienna Senior Living (SIA), Enghouse Systems (ENGH), National Bank (NA), and Freehold Royalties (FRU). On the U.S. side, I sold a longtime laggard and a small position in Vodafone and used its proceeds and accumulated dividends to add to Adobe (ADBE). All my portfolios are well diversified, so my overall approach is to cull one or two companies, add one or two, but mostly add to existing positions that look most favourable at the time.
Secondly, in February and March, as I reviewed year-end financials of owned companies, I sold immediately if any concerns were observed. In the past I simply noted them, then sold at some point during the year. I now have more cash in my accounts than normal. I rarely have cash because markets go up a lot more than they go down, but right now I don’t mind having a little cushion cash in each account.
Thirdly, I have previously written about downside insurance, using S&P 500 index puts. I have purchased such insurance since late in 2021, prior to the 2022 bear market. Even though insurance generally costs money, it provides some comfort when markets hit an air pocket. I had nine such contracts and sold three shortly after April 2, making a nice profit on the insurance. With the two-thirds recovery now in place, I once again purchased a new insurance contract.
Fourthly, way back in 2020 I wrote a column on the value of having precious metals in a portfolio. Even though gold stocks haven’t been great performers, they have come to life lately and have been the best sector so far this year. Gold has very little correlation with the overall stock market.
None of these were big moves, because I don’t make big moves in the unpredictable environment of stock investing. However, collectively, they buffered the short-term losses. The main thing is to avoid panic during these volatile periods. Having a few decisions such as index insurance puts and precious metals go positive, when everything else is going negative, helps reduce the panic emotion.
I am a long way from being convinced the malaise of the last couple months is over, and I’m surprised how well the market has recovered in the face of the uncertainty.
As for my current investing plans, I will continue to focus on Canadian- and U.S.-based companies that represent decent value with a promising future. However, with my current cautious view on North America, I am starting to look for opportunities internationally. I have already added small positions in a Brazilian and a South Korean ETF (exchange-traded fund), and in Latin America’s largest e-commerce company Mercado Libre (MELI).
The future view is always murky, and looks particularly so at this time. However, the market is inherently unpredictable and sitting entirely on the sidelines is a known losing strategy.
