A Comment -- General Comments From an Expert (A Commentary)

Maybe we are not at the panic stage yet but the markets are retreating due to tariffs, AI questions, uncertain U.S. economic and foreign policy. Maybe we have hit a bottom but we can't tell. He is looking for new lows earlier in the day followed by buying back in later. Consumer spending which has been constant is shifting along with sentiment so there is concern going forward. He has been taking some of the volatility out of clients' portfolios through asset allocation while still protecting them against the cost of living increases, inflation and their need for money in the next few years. With the downdraft this is an opportunity for younger people to double up on the the market.

The question was on an i shares Composite High Dividend ETF and individual securities. He would not go into single securities at this time. An ETF is more stable because it is diversified and can take draw downs. He has been and still is avoiding Canada, now because of tariffs and the economy. Also there is an election coming up and there will be a new administration.

The question was on ETF's hedging the U.S. dollar. This involves timing and that is an issue. He is going unhedged recently. If the U.S. dollar is strong then go unhedged. If the Canadian dollar is strong and going up then hedge. Sometimes it's best to not pay attention to hedging and just let it play out.

Diversification goes back to asset allocation between fixed income and equities. There are over 1500 ETF's in Canada,

The question was on a minerals ETF such as UAM in the uranium field. There is also URA. Do not hold more than 5% in a 100% equity portfolio.

Editors Note: The question was on the Horizons Marijuana ETF but the symbol couldn't be found. He feels the industry has been saturated. He would advise selling and moving on with your capital. It is a complicated story and he doesn't know if the U.S. moves on it.

The question was on preferred shares. He thinks of them as a long bond and doesn't hold them. They are OK as a part of a group of fixed income holdings. They can be used as short or long term investments. With rates going down he is OK with preferred shares.

The question was on covered calls. These work well when markets are volatile and he thinks the market is still good for covered calls. It is complicated. The time is right now, but long term they will drag the portfolio down. Markets going up are not good for covered calls.

This is the realization by investors that markets don't always go one way. There's generally a correction at some point, and we're probably living through one. With all the tariff talk and the uncertainty that's created, business leaders really don't know if they should spend money or not, should they hire or not. What's their cashflow going to be based on trade barriers and volatility in currency markets?

This will potentially accelerate a slowdown, if not recession, in the economy. Market participants are reacting to that.

All this is a normal reaction. People say that markets go up like escalators, but down like elevators. The fear of losing is usually more acute than the euphoria from winning. It always looks bad, but we have to remember that the sun will rise tomorrow.

Right now, markets will level off. You're seeing more of a selloff in the sectors that were overvalued. You might say that markets are a bit oversold, and we might be due for a bounce potentially. He can't say for sure if this is the end of the correction. Starting to see a bit of nibbling in sectors that haven't gotten a lot of love from investors for quite a while.

If you have a long-term view, you want to pick your spots. Don't just buy in, because you need to know what you're buying into. Secondly, what's your objective? Is is to maximize growth, earn a decent income, protect capital, stay ahead of inflation? Once you have that figured out, then you can begin on portfolio architecture and design a portfolio that makes sense for you.

Yesterday, he was at 30% cash. He's bought a little bit, but still has ~28-30% cash across equity accounts. As a value manager, he doesn't feel as though he always has to be invested. He makes tactical moves. If he doesn't see a margin of safety, he's not going to just buy in for the sake of buying. For him, preservation of capital comes first.

With the correction, he's starting to see some bargains. He'll probably continue buying his favourite names into next week, as long as they hit his targets.

The market's starting to realize that we are able to do more with less, as demonstrated by DeepSeek (whether you believe the narrative or not). How much do companies really need to invest to get the output they want?

He's always fascinated by the fact that two guys in a garage disrupted the whole industry via Google. Similarly, DeepSeek has potentially disrupted the nascent AI industry. Who's to say that the next DeepSeek doesn't come out and do even more with less? What does that say about the investment from all the hyperscalers? 

People need to reduce their euphoria a bit and think pragmatically and calmly about the future and valuations.

Last 2 years have been very good, generally speaking. We've dropped from the peak only about 6-8%, it's not Armageddon yet. It's a normal course correction. But, as an investor, you need to know:  your pain points, objectives, and an appropriate asset mix for you. Corrections actually give investors a good opportunity to buy in at a reasonable price, rather than chasing the top.

We'll need to see if this correction becomes something much worse.

Gold Stocks Well Positioned for Tariffs:

Precious metals like gold are global commodities. Most investors consider gold as an investment and store of value. These companies could operate their businesses in the domestic and international markets (aside from the U.S.) with global demand. Therefore, there is minimal exposure to trade wars.

Agnico Eagle Mines Limited (AEM, Market Cap: $70 billion): A global gold mining company with mines located in Canada, Australia, Finland, and Mexico.

Franco-Nevada Corporation (FMV, Market Cap: $40 billion): A capital-light gold royalty company with solid cash flow generation.

Wheaton Precious Metals Corp. (WPM, Market Cap: $45 billion): A precious metal miner that produces and sells gold, silver, palladium and cobalt deposits.
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