Javed Mirza A Comment -- General Comments From an Expert A Commentary COMMENT Jul 08, 2025

Last week, we saw the ADP (US payroll) come out. ADP cuts paycheques, so is accurate, and ADP claims net job losses in June. Trump can yell at Powell all he likes, but it will do nothing. Interest rates won't move until there is economic clarity. Not today, but markets are growing desensitized to trade news. Today, President TACO is pounding his fist on the bigger numbers. The Big Beautiful Bill was signed into law, and Big Beautiful Deficits are coming, and he's got to pay for them. Deficits are a headwind to long-term growth. Trump needs revenues, so he's pushing tariffs hard. Uncertainty is very high, while markets are priced to perfection at all-time highs. He was supposed to sign 90 trade deals by now, but there are two frameworks for trade deals, instead (UK and Vietnam). Headwinds are building. The BB Bill offers very little net-new stimulus in tax cuts. The bill just continues what he started in his first term. Rather, there's a lot of spending.

It's about timing. About 18 months ago, he didn't like the valuation in the public markets and so was investing his assets into private equity. Then, he switched back to public markets right before Trump flipped the tariff switch in April. He caught the market bounce of April 8. He likes the lower volatility of private equity, but you give up liquidity. 

The U.S. dollar volatility: There's been lots of talk about it. Year to date, the USD is -11%, but in the big picture, this is noise. The USD is basically where it was in the early 1970s. Historically, the USD spiked in the mid-1980s which led to the Plaza Accord to strengthen other currencies which lowered the too-high USD, and in 1999 when the Euro was created. That said, the USD now does matter. The USD's depreciation, plus the inflationary impact of tariffs that's coming will negatively impact inflation. The Fed pausing rates makes complete sense. The positive side: a weakening USD is positive for earnings, particularly for these sectors (many revenues from abroad): tech, materials, communication services and consumer staples. Look for what companies say about inflation and tariffs during earnings season.

Market Update:

Canada’s population growth slows in the first quarter of 2025, with almost no growth, marking the sixth consecutive quarter of slower population growth. On the other hand, the U.S. Federal Reserve kept interest rates unchanged in June in the range of 4.25 – 4.5 percent, while keeping a projection for two rate cuts in 2025. The Canadian dollar was 72.85 cents USD. The U.S. S&P 500 ended the week down 0.5%, while the TSX was down 0.2%.

Consumer discretionary and real estate slid by 1.6% and 1.0%, respectively, while industrials and consumer staples gave up 0.7%, each. Materials and financials ended the week mostly flat, while energy edged up by 2.6% and technology gained 0.3%. The most heavily traded shares by volume were National Bank of Canada (NA), Tourmaline Oil Corp (TOU) and Keyera Corp (KEY).
Unlock Premium - Try 5i Free 

Tariffs do matter: they raise prices almost immediately. If we slap a 25% tariff on all the autos the US imports from South Korea and Japan, that means about 17% of all cars sold in the US last year. This means a 25% price increase on one-sixth of the US auto market. That's on top of EXISTING tariffs on everything from South Korea and Japan. That means inflation and why the indices fell nearly 1% today. A few months ago, that would have been a deeper decline. Remember that the US has a big, persistent trade deficit with South Korean and Japan. So, 17% of the cars in the US market will be priced out of the market. That's good news from US carmakers Ford and GM, but both their stocks fell today. Even after today's pullback, the market remains overbought. These tariff letters by Trump are feeling like they came from Borat--you aren't sure if they hold up to scrutiny, like he's picking these tariff numbers out of a hat. Do we take them seriously? Even if a US company pledges to shift production to the US, it doesn't protect them from tariffs (i.e. Apple). Who knows what will happen next? He is taking profits on some stocks.

Last Thursday's monthly non-farm payrolls report is crucial, giving a real read on labour. Labour can predict GDP growth and the direction of the stock market. LW says look at the employment to population ratio. Data from 1948-1973 yielded a 5.5-year cycle that repeated itself. Every upsurge in employment was predicted by this 5.5-year cycle. The chart from 1971-1995 also had the 5.5-year cycle predict upturns in jobs, though it was more muted than the earlier period. From 1994-2020 also showed peaks based on the 5.5 years. The last five years was skewed because of Covid, but has more recently resumed this 5.5-year cycle. Upshot: the ratio should expand starting now through fall 2027.

Typically, people go on holiday in August; seasonality is poor in August; and September is the weakest month of the year. Indices have been making record highs and sentiment is tilting to bullish, so he's starting to get cautious. Doesn't know why September is the worst, but it's the only month with a negative return. At the start of this year, he was cautious, sensing that we're near the end of the economic cycle that began in Oct. 2022. Every 3-5 years there's a big 15-20% correction (usually 5-7% corrections), but the correction between Feb.-Apr. was quick. At May's end, he saw a near 4-year cycle begin. Once the Dow hits a new high, trading will be sideways before there's a correction, which will be a great opportunity to buy.

Yes, a good idea, given U.S. policies now which will debase the US currency. Also BRICS is helping the shift towards a gold standard, which will be positive for the Canadian dollar. Likes the CAD going forward very much. The USD will bounce the next 6-8 weeks, but the USD will remain in am overall downtrend. Since 2022, we're seeing lower highs and lower lows after an uptrend from 2020-2022. We saw a similar pattern in 2000 when the CAD was worth 62 cents then rose to around 2000 went the CAD was over par the USD. He sees a stronger CAD vs. the USD.

$3,000 is the downside potential or 10% down. The rally has been capped at $3,500. He likes gold long-term, but near term this will trend lower and consolidate.