Opinions
John Zechner A Comment -- General Comments From an Expert A Commentary COMMENT Sep 09, 2025
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It sure was. Historically, the period from mid-August to mid-October has been the weakest and most volatile time of the year for stock markets. Usually we see big corrections and selloffs and worries. Not this year though.
Markets have been rocking and rolling right through September. New all-time highs, not just here in Canada but in the US and around the world.
It's always hard to predict when you'll have a pullback. Historically the weakest month is September, with October being the second weakest. But we went through September with relatively good results. If there were a small pullback, he wouldn't be surprised but he'd take advantage of it.
At times there's a two-tier market, where some of the higher-valuation stocks get lots of love and attention, while other stocks are neglected. Many investors in Canada don't realize that over the last 12 months more than 30 companies have been subject to actual, or pending, takeovers. Our market is cheaper than the US, and it's a call for Canadians to invest in their home market.
Yes. One research report shows that if you take out the performance of gold and silver, and that's about 12%, the TSX is up ~12.7-12.8%. If you're underweight gold and silver as a portfolio manager, your performance hasn't been the greatest. This doesn't always happen in the Canadian market.
He and his team are fundamental investors. The TSX is trading at a cheaper valuation, with a higher dividend yield, and other metrics are good. Over the next couple of years you want to be in hard assets, and Canada has a lot of those.
He's a North American manager, but for new $$ coming in about 75% will go to Canada and 25% to the US. That's how he sees the world.
He's investing in companies that have good hard assets, grow cashflow, and pay dividends. PPL is one example. Its pipelines will benefit from LNG and LNG expansion. Others includes JWEL and KEY. Two of his three top picks are Canadian. Great companies in Canada; you don't always have to head to the US for good value.
Time to take a look. On valuation, much cheaper than overall market. Money is starting to flow in from other, overvalued sectors.
He owns JNJ. Two years ago, spun off consumer division. So now it's just drugs and medical devices. Trading ~14-15x PE. Spending billions to build new facilities in US, so that gets them on the right side of the Trump administration.
Remains to be seen. We're still in early days (or innings, because we love baseball here in Toronto ;) There will be winners, but we won't know who until 3-5 years down the road. It's also about how companies adopt AI. We'll have to monitor the spending and see how effective the spending is.
Full agenda, lots of trade items. The first meeting was challenging, but Carney showed grace under pressure. The US needs our aluminum, getting about 62% from us. Steel is a bit different, as it's more of a global commodity.
He'd like to see progress on tariffs coming down, and an idea of what's going to happen with USMCA next May. Canada needs to reinforce to the US that we're a friend, steady ally, and good trading partner. Trade, including that with small and medium businesses, is for the mutual benefit of many parties.
In a world that's getting more dangerous, it's good to have allies. Canada's doing a good job stepping up our military in the defense of our North.
For the US administration to save face, perhaps we can give the US a bone (such as importing more goat milk from the US instead of from elsewhere). The US could take more of our aluminum to benefit its aerospace and defense industry.
Poster child for that might be Canadian Pacific. Since the merger with KSU, you can take a railcar from northern Alberta all the way to Mexico. While a lot of goods are covered by USMCA, a lot of business owners want to know what's going to happen next May.
The lumber industry is also having a tough time. He owns no companies in the sector, though he has in the past.
And there's steel. A company like Algoma in Sault Ste. Marie can compete, but not with 50% tariffs. The industry needs relief, so perhaps there could be some compromise here.
Defense industry in Canada is small. He used to own Calian Group, which provides defense services. We need to spend more, and this will come from government. There's now also a movement in the US where smaller, venture-type companies work with the armed forces to test (and sometimes even pay for) fledgling products.
More money will be spent in the sector, and there will be lots of trickle-down beneficiaries. Drone-versus-drone is actually much cheaper than missile-versus-missile. Companies that have good cybersecurity will be employing the best software.
There will be weakness to finish this year. Is bearish. The economy has been resilient, but Canadian GNP for Q2 was negative, and last week's US job numbers were weak last week and even this morning average gains in the past year far lower than projected. Thing is, companies are not laying off workers, given less migration and the lack of workers. Companies are not adding jobs because of the unknowns by tarrifs. Expects the Fed will cut 3 times and the Bank of Canada goes back in to an easing mode. Valuations are at all-time highs, and so earnings are at risk. He is trimming some tech positions and looking at defensives like telecoms. He questions this so-called broadening trade. Cyclicals will have a tough time going forward. Tech continues to deliver 20% earnings growth, so he maintains a health tech weighting.