Greg Newman A Comment -- General Comments From an Expert A Commentary COMMENT Apr 25, 2025

There's a lot going on, and Mark Carney has to win first. We'll see what happens next week.

Carney is showing his hand a little bit and it's a good move. The Trump administration has put themselves in a bit of a pickle here, and they need to see deals. For this market to keep going higher, it needs clarity and a framework of agreement (without, necessarily, all the details). Both the bond and equity markets need to see that. 

Time is ticking against the Americans. Trump likes to be popular. And he wants to win mid-terms that aren't all that far away, especially if they've made this one goof move to put the economy into a recession. The #1 rule of governance is to not put your economy into a recession.

The medicine delivered on April 2 was really too hard for economies to deal with. The reasons we've had rallies since April 9 is because the US has kicked the can down the road by 90 days and has done carveouts for electronics. That 90 days can go by quickly, time is ticking.

Markets are clinging to hope that something will come out of weekend meetings between Trump and other dignitaries attending the pope's funeral. CEO's won't like it if there's no architecture on deals for months and months. People will sit on their hands, economic activity will slow, and the odds of recession will tick higher.

You want to diversify, don't bank on just one stock carrying the load. Look at a mix of fixed income, preferred shares, good dividend stocks with visible dividend growth, robust dividends. Places to look: energy infrastructure, utilities, industrials, financials. These sectors are all in Canada, as well as being in the US and globally.

Especially in markets like these, you want to inch in incrementally and slowly. Same approach with falling knives.

It's election day. Investors want a change. The last 10 years have not seen the most investor-friendly government. Given tariffs, people realize we need to invest in our economy, companies spending ahead on capex and sourcing resource development and industry expansion. It's nice to talk about interprovincial trade barriers, but each province is its own jurisdiction (i.e. doctors). However, they could remove the red tape in resource development.

Invest in money market ETFs or high-interest savings accounts paying yields of 3.5% or higher. ETFs

We've heard from companies a lot about a cloudy future. During earnings season, more companies than not are beating, but many can't look ahead until there's clarity, given Washington's volatile policies. The outcome of the Canadian election will make little difference; Canada is so leveraged to the US economy. He may give the edge to the Tories in terms of their polices and the Liberals', but neither party will move the needle. PM Carney is the most-qualified person running a country who understands the global economy, given that he ran two central banks.

If you panic when the market is running for the exits, then do not invest by yourself, but work with an advisor. Also, do dollar-cost averaging, like not buying when markets rise 10% after buying an initial tranche, but invest in a correction, like if we return to recent lows.

Megatech stocks report this week, and those names make up 26% of the Nasdaq 100 and 19.% of the S&P. The markets tell us we remain in a manic mood, but are back to April 2 level when Trump announced tariffs. Markets are saying, We had the bump and we've been through it and we're good to go here. Trump is walking back some of this tariffs. Now, markets are 1% from April 2. There's a lot of psychological resistance against current index levels. To go higher, we need to solve the trade war--nobody knows. We're in the early stage of a bear market unless the market rises to the 200-day moving average. The key is resolving trade issues, but he doesn't see that happening any time soon. We will see a memo of understanding from Korean and Japan, but we are not past volatility, not at al.. We will re-test recent lows in the coming quarters.

Red flag when investing in a company: Inventory or receivables rising faster than sales

Sorry, this one requires some math, but investors should always look at receivables and inventory levels in relation to sales when considering a company. Look for consistency: if sales rise 10 per cent, then a 10 per cent increase in inventory is OK, but a 25 per cent rise is not.

Sure, the company might be building inventory for a future growth spurt. But just as likely — if not more likely — the company’s expectations for sales are wrong, and its inventory is building because customers are not buying as fast as expected.

This can hurt two ways. Customers might have too much and thus back off making new sales orders for a period of time, resulting in weak future sales growth at the company you are investigating. Or, worse, you might see the company take a writedown as its inventory becomes obsolete and unsaleable.

Similarly, one needs to watch receivables. If they are growing faster than sales, it could mean your company is offering favourable payment terms in order to secure more sales, or, much worse, it is having trouble collecting on customer invoices.
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