Opinions
Christine Poole A Comment -- General Comments From an Expert A Commentary COMMENT Apr 21, 2025
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Everyone's concerned about tariffs. His firm is working around that by following their rules. He was very heavy in cash through most of the winter. Quantitatively, he has seen a couple of reasons for getting back into the market and has been stepping in over the past month.
There are also some signs from the fundamental side of potential slowing and recession, on both sides of the border. He doesn't want to step in aggressively. He's been buying value, but is still holding tons of cash. He's trying to buy equities that aren't correlated to the overall stock market.
Markets rarely make V bottoms. Covid in 2020 did do that, but that's rare over 100 years of charting. Usually, a market falls and then does some ups and downs before deciding to continue with the bull market. Unless this is another of those 1 in 100 years V bottoms, he's wary of stepping in too aggressively.
He has a quant model that tells him when risk is high. His risk model went into neutral, and then it moved ahead of the 50-day MA and then the 200-day MA, so he stepped in some more. Yet he's still over 25% cash.
If we take out the highs on the S&P, then he has proof that we are moving back into a bull market. But we haven't done that yet.
He's recently been talking about this on his blogs and videos. Right now, he prefers silver over gold (though he still holds it). Silver has a catchup trade to do, it's just getting started. Silver's still somewhat below its all-time high, whereas gold took out its high a year or so ago.
He owns lots of silver, but only started legging in early 2025 or late 2024. Silver futures chart is in fine shape. Coming down to the trendline now, so probably a good opportunity. When things get overbought, he takes profits, and goes back in later at a lower price.
Bases are good, and they say that "the greater the base the better the case". He loves base breakouts; he wrote a book called Sideways on that topic.
If a stock breaks out for real, it needs to stay above resistance for 3 days to 3 weeks. And then you start legging in. There's tons of potential on a stock that breaks out.
It's difficult to tune out, as it's pervasive, loud, and global. His team doesn't exactly tune it out, but they're resolute in their commitment not to trade in a knee-jerk fashion to executive orders, tweets, and threats. Time and again, we've come to learn that the playbook is to start with big/bully/bluff bets and then to walk back.
The risk as an investor to trading on a steady stream of reliably unreliable information is the risk of being whipsawed. Market action in the wake of liberation day (aka liquidation day) is a great case in point. His firm has made some fine-tuning and some tweaks within portfolios, but no radical changes.
It is probably a buy-ahead-of-tariffs situation. In fact the US had a negative print for GDP in Q1, and a lot of that was due to a massive surge in imports. The US recorded its largest trade deficit in history in the months coming into the tariffs taking effect.
Households were stocking the pantry and corporates were stocking the warehouses, getting products onshore before whatever tariffs were imposed. We're still seeing the tail end of that.
Looking pretty good, and that's the real conundrum for investors. There's the hard data (measured efficiently), such as employment, retail sales, and GDP. For the most part, the hard data is coming in just fine.
On the other hand, that's backward looking, so investors often rely on soft data from surveys of households or corporate executives. Purchasing manager indices are another good example. Those are coming in very squishy, not surprising given the noise surrounding trade, tariff, and policy confusion.
But as these relate to earnings specifically, in both Canada and the US we've seen the bulk of earnings reports come in. Just waiting for the banks, which we'll see next week. Most earnings are decent, showing growth YOY in high single digits or sometimes low double digits. So far, so good. Have to see what Q2 looks like.
Seeing analysts for both Canadian and US companies really ratcheting down growth expectations for remainder of the year. Now seeing consensus estimates of 6-7% earnings growth for the S&P 500 and the TSX, which has really come down a lot from the earlier estimates of 12-13%.
Hitting record highs, and his firm thinks it's going higher. There's been an American exceptionalism trade on for more than a decade, and some of the lustre's coming off. Capital is returning to other regions of the world, including Canada.
Canada's uniquely advantaged by having one of the largest index weights in gold of any developed market in the world, and gold's been doing very well. That and a number of other factors under the hood advantage Canada, not the least of which is still a wide valuation disparity between our market and the US market.
Investing 101: Think in terms of years, not months or quarters
This one is so important and probably the one that gets ignored most often by investors. No one wants to wait 5 or 10 years to see their portfolio providegainss. We want it all now. Unfortunately, patience is key in a portfolio. Set up a structure that makes sense for the long-term and don't change it unless your situation sees a material change (or if it was inappropriate to begin with).
Markets take time to generate returns and compounding takes decades to have the true power of compounding returns felt. It will be worth it though.
Similarly, companies do not execute a strategy in three month periods. It takes years to change a large company and for its strategy to be fully rolled-out, so an investment in a company should in-turn be viewed in a matter of years and not quarters.
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Definitely overhanging the market and causing a lot of uncertainty. Indicates that he may be flexible to negotiating with other countries. We need to see some progress and definitive news on his trade deals.
Business confidence and consumer confidence have plummeted because no one knows what's going to happen. When confidence is low, businesses wait to do anything. They're sitting on their hands, which usually leads to less growth and less hiring, becoming headwinds to the economy.