Stockchase Opinions

Bill Harris, CFA A Comment -- General Comments From an Expert A Commentary COMMENT Jul 10, 2025

Tariffs.

There are all sorts of strategies in the stock market, including being a moth that just wants to go to the flame. His firm's strategy is to not be the bullseye. Their idea is to find a great business that everyone's ignoring, and so to find things that are not going to be affected by tariffs. Focusing on the tariffs themselves is just too hard to figure out.

When Trump was elected in November he was already talking about tariffs, so they went through all their companies to see how they'd be affected by tariffs. So far, the one impacted the most is CP Rail. They own it for the long term, can't be replicated, monopoly. It has been hit, but has moved mostly sideways. Looking at the stock action over the last couple of days, it looks as though tariffs are all priced in and the market's looking through that.

A lot of things aren't affected by tariffs. The overall economy might get softer and it looks as though it is, and the consumer might be affected. Will auto manufacturers be affected? Yes, 100%. But they don't affect the earnings from MSFT. In Canada, earnings for a BN would be affected by interest rates and the 10-year bond yield. And the budget is way more important to the 10-year bond yield and how that affects the stock market. Those things are more important than tariffs.

That's why the market has digested tariffs so quickly. They have a specific impact on this little part of the stock market, but not the big picture.

It's the ideal tool to help you make quicker, more informed decisions for managing and tracking your investments.

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COMMENT
"A wall of worry, and a mountain of opportunity."

Precisely. This has got to be one of the most-hated rallies of all time. Since 2019 we've faced a global pandemic, war, inflation spikes, rates hikes, tariff tantrums, and widespread geopolitical instability. Yet global economies remain resilient and robust, while investors are reluctant to embrace this rally. Strange.

COMMENT
Tariffs.

Particularly in Canada, the word "tariff" is hitting home. He believes the skepticism is misplaced, as there are underappreciated tailwinds. We have strong household and corporate balance sheets, and there's potential for a pivot to a dovish monetary policy. These things can surprise to the upside.

Starting to see tariffs work their way through negotiations. The lack of clarity is being cleared up. Layer on top of that the accelerating effect of AI, which can both increase productivity and exert a deflationary force across industries. The long-term case for growth becomes pretty compelling. Odds of a recession are overstated. 

COMMENT
Canada's GDP within the tariff spectrum.

Working out better than expected. But it'll be a bit of a tough road as time goes on. A lot of what Canada does and sells is under pressure and likely to remain that way for some time. 

Tomorrow's the deadline, and he doesn't think we'll have a new deal. Get used to it ;)  Trump seems adamant that there will be no extension, and he seems to be taking a pretty tough stand on Canada.

COMMENT
Uncertainty.

Definitely uncertainty out there, which is surprising when you see that markets are at all-time highs in both Canada and the US. 

But he looks at the market long distance from an options perspective. So he likes the uncertainty, as it keeps both options prices and implied volatility higher.

COMMENT
Where's the optimism coming from?

He couldn't tell you. His firm has maintained pretty cautious optimism. Businesses have to adapt to whatever the market throws at them. Investors have been more optimistic than he would have thought.

He's out there still trying to find value and maintain the positions that haven't gotten too extended.

BUY ON WEAKNESS
Mag 7.

He wants companies that are trading at attractive valuations. PE is not the be all and end all, but it's definitely where he starts his analysis. Both META and MSFT had pretty good numbers this quarter and the stocks are doing well today. If you plan to own all of them and want to buy more, then buy the ones trading at cheaper valuations. 

COMMENT
Canadian vs. US options.

Should always be treated as capital gains if you're selling options, whether in Canada or the US. There will just be some difference in the currency when calculating what those gains and losses are.

COMMENT
My stock's dropped. How can I use options to recover some of that money?

There are some strategies you can use, though it might be a longer conversation. His team has recorded some webinars on this topic, which can be found on their website.

If you own a stock and it goes up, you're making money at 1x (if it goes up $1, you make $1). There's something called a 1x2 call spread. With this strategy, you buy a call option as well, and then sell 2 calls at a higher strike. What you can do is pay for the call by selling the other 2, so your net cash outlay can be zero. Between the window of the call that you bought and the 2 that you sold, you actually make money at 2:1. Above that level, you stop making money. This method could, potentially, get you back to break-even more quickly.

It maintains the same downside. If the stock keeps going down, you didn't pay any money to put the trade on, so you're at 1:1 on the downside.

COMMENT
Metrics.

The majority of the time, he starts with PE. You want companies that make money. He doesn't take a lot of chances in speculating where something will get to. 

From there, another thing to look at is growth; doesn't want a company with dwindling earnings.