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Stockchase Insights A Comment -- General Comments From an Expert A Commentary COMMENT Apr 04, 2025
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There's always something a bit unique, as no two situations are exactly the same. The last time we went through a shocker was during Covid in March 2020, and the market fell over 30%. The message he sent to clients then was whenever you look back at times like these, you always say that you should've bought great companies when they were on sale. That's eternally the message.
Warren Buffett says buy when there's blood in the streets. If you buy great quality (and this is the moment to buy great quality because it's cheap again), you'll be well served when you look back at your portfolio 5 years from now.
An "all or none" approach is probably the wrong thing to do, as it just leads to paralysis. If someone had, say, $50k to invest, just be disciplined and put in $10k (or whatever's comfortable) a month and start buying today. If you wait until calm returns and things improve, you'll have missed the first 25% move.
Buy the world's best companies. Anything from Canadian bank stocks to any of the great technology companies. They've all been hammered, and this is your opportunity. Dividend yields are higher because you're paying less for these stocks. Great management teams will figure out how to navigate these situations.
It's always a mistake to sell when the world is panicking. Don't forget Warren Buffett's advice to buy when people are panicked and sell when everything looks rosy. These quality companies were great 10 years ago, and they'll be great 10 years from now. If you can buy them on sale, why wouldn't you? Investors should be loving these times.
We're seeing emotional, knee-jerk reactions, "I need to get in. I need to get out." People should step back and look at their asset mix, what and why they're holding. If you're more than 5 years from retirement you're fine being all in stocks, can withstand volatility, which allows to take advantage of swings like this. If not, can't withstand it, you should hold some fixed income to give you safety. Being concentrated only in Canada, making up only 3% of global stocks, doesn't make sense. Diversify. We've seen 20% drops like now in 2018 and 2020 and 2022--the average intra-year drawdown over the last 75 years is 14%. Drawdowns are normal in markets, though this time it's self-inflicted (through tariffs). Before, dips allowed investors to get right away, but this time it depends on one person: Trump. Will this be V-shaped, or will it be prolonged, which will likely lead to a recession.
Everybody's different. Some of us can take these ups and downs with ease, while others are glued to the TV or computer. The overarching lesson here is that, hopefully, investors came into this well prepared, well diversified with asset mixes that suited their objectives, and with portfolio target levels in place.
His firm spent January and February bringing asset levels back to target levels. Equities had run in 2023 and 2024, so any excess over target level was brought back.
Now that we're in the current situation, just let it play out and let all the chapters be written. He's talked to a lot of clients and reminded them that we go through these events fairly often. Think back to the pandemic of 5 years ago, Brexit of 2016, GFC of 2008, 9/11, and so on. He gently asks people how they felt in the middle of that, with markets going straight down? That brings back memories of fear.
But the lesson is that 6 weeks ago, we hit an all-time high in the markets. That means that all those past events were overcome.
His playbook is well known -- use scare tactics and intimidation to extract greater concessions than he might get otherwise. We saw this in Canada just weeks ago when he was talking about the 51st state and diminishing us as a nation. And you saw Canada's reaction. What happened next? He got some concessions, and then he backed off.
That same playbook will likely play out with the rest of the world. But, of course, no one really knows. If you're portfolio is well structured, you should be OK.
Yes, he'd be buying for current clients with new money or for brand-new clients. This will turn out to be a good buying opportunity. Keep your head and let time work for you. Event-driven recessions (rather than economic, cyclical recessions) tend to be shorter and shallower. About halfway through a recession, the market (being a forward-looking indicator) starts to move up.
But he's not buying tactically. His firm takes a strategic approach, they're not market timers. Which means that they ride through these events, as uncomfortable as they are. His firm's approach has worked over the long term, so why mess with that?
Yes. That will be the second wave of Trumpism 2.0. First he wants to take care of tariffs, then give people a big tax break (even though they'll be paying more in tax through tariffs). The next phase is to reduce regulatory burdens on companies.
He hears that the M&A pipeline is full, especially on the higher end. Lots of deals being either done or contemplated.
Trying to Time the Market is a Fool's Errand
There is a reason that trying to time market bottoms and tops are what most would call a ‘fool’s errand’, and this is mostly because market bottoms and tops are exclusively obvious in hindsight, but also because it goes against our basic human nature. When the markets are declining day after day, and there is seemingly no end in sight, our instincts are to assume that this trend will continue and fear that the markets will not recover for quite some time. On the contrary, when markets are rising day after day, it is easy to believe that this trend will continue and human emotions stoke a fear that selling at those levels would be ‘too early’. Calling the winter market top of 2021 is now obvious in hindsight – inflation was picking up and the Fed was preparing for higher rates and reduced liquidity, but yet most investors chose not to sell – why? We believe that it is because most investors believed that the markets would continue their climb higher, as was the case in the latter part of 2020 and throughout 2021. Investors’ fear of selling at that point and regretting selling too early was high.
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