Richard Orrell A Comment -- General Comments From an Expert A Commentary COMMENT Mar 10, 2025

If there's one thing the market doesn't like, it's uncertainty. And we've definitely seen that this year, a bit of a rollercoaster. Doesn't know why the market's up right now. Market's looking for some clarity, as she and everyone else are. 

You want to be able to digest the news and then take it from there. Have to assess the repercussions on Canadian, US, and global markets.

Probably, but the US administration has also said that there's room for negotiation. We've already seen it before, where tariffs have been stated, then reneged on, then postponed. We're all tired of trying to figure out what the implications are.

All we can do is our best in trying to formulate a portfolio that's resilient in any kind of tariff situation. Rather than what amount the tariffs are, the more important question is how long they remain in place.

Automotive and transportation for sure. Consumer discretionary. These are all sectors that her firm didn't have much exposure in to start with, and not because of tariffs. Their portfolios have always been more defensive, shying away from cyclicality. 

She likes a consistent dividend stream. As a result, their client portfolios are focused on utilities, pipelines, telcos, and the like. As it turns out, those sectors aren't prone to tariffs. So their portfolios have been performing really well as people make the flight to safety. Her firm has always liked the flight to safety, it's just that it's more popular now than it was last year.

Yes. They recommended this course of action last year when there was the huge risk-on sentiment related to AI. They were buying defensive names at cheaper prices. Now those defensive names are trading a little more expensively, as money has flown out of the risky stocks and into safe havens. As well, money's come out of the US and into areas such as Canada, which is where her firm has always been.

Still, those defensive names have resilience and can outperform in any kind of market environment. Especially as we're going into a period of potential economic weakness and more volatility.

Oligopolies, good businesses for the long term. But a lot of the growth seen over the last 10 years is behind them. There's been lots of consolidation in the space. Economic growth is a bit uncertain in Canada right now, in addition to the impact tariffs. Have to consider how each one manages with cost-cutting to increase margins.

Take a look at RY and TD.

Last time we saw this was in March 2020, when everybody thought we were all going to die. Markets came back fairly quickly from that. This has a bit of a different feel to it.

We haven't had a proper bear market in NA since 2009. We've had 16 years of a bull market punctuated by some minimal corrections. So it could be that we're seeing the market turn over here, possibly heading for a bear market.

The Mag 7 have really been the ones leading the market downward. Those were the ones with the highest multiples and that have been lagging the market at least since the inauguration.

Other sectors are doing relatively well. With all the tariffs on retail products that are generally made in developing countries, it's surprising that dollar stores and COST are actually up today.

There are some good and proper times to panic, and he's not sure that today is one of them. Right now, he has a reasonable amount of cash (between 20-40%) in portfolios. If the tariffs had been less robust than feared, the markets would be on a tear the other way.

If you're adding to your portfolio on a regular basis, either by investing cash that's stored up or by regular contributions, these correction days are actually really helpful. These days provide excellent buying opportunities, even if markets go down further tomorrow. 

For stocks that you'd always wanted to get in on, today's not a half bad day to start. If you have $10k to invest, invest $2k today. It'll be easier to make the next decision tomorrow if you started with a smaller one today. If the market goes down, at least you have $8k left; if the market goes up, thank goodness you started to buy.

Yes. They didn't stop paying dividends even during the 2008 financial crisis. Except for MFC, all financial services companies also kept their dividends. At the best of times, it's a severe, career-interrupting move to cancel a dividend. For a Canadian bank, it would be catastrophic. 

Some are stronger than others. RY is the 800-pound gorilla that all the others are chasing. TD has had its issues in the US; but you'll notice it's up from the time US sanctions were imposed. All are resilient, a fiercely protected species.