Geoff Scott A Comment -- General Comments From an Expert A Commentary COMMENT Mar 20, 2018

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.

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.

In the last few days during all these tariffs, there's been a sudden, aggressive surge in treasury yields. That's probably a key reason why Trump shifted policy on tariffs today. The 10-year yield jumped from 4% last week to 4.3% which is a very big move. That is not supposed to happen when the stock market is stressed. We don't want these rates shooting up. Bad. The spike has been counter-intuitive due to selling treasuries. Keep an eye on this. This quirk should fizzle out though, especially with this 90-day tariff pause.

Garner feels that gold is very overvalued, not this bad since summer 2011 during the debt crisis. But gold plunged 45% from its euphoric high. If that happened now, gold would fall to $1,650/ounce. Historically, gold falls in and out of periods of correlation with other assets, namely stocks. When gold breaks out, then falls below support, this is a bull trap. Recently, we saw a euphoric peak above $3,000. A breakdown below $2,900 opens a trap door downwards. A gold rally has never survived an RSI reading above 70 without a correction. And this has happened 3 times over the past decade. She expects gold to fall.