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

That's probably the $1M question. A tariff is effectively inflation. Could take 1-2 quarters to hit. Rising prices will put companies under pressure. We're seeing companies that were marginally profitable already start to cut employees. Some boards are making opportunistic cuts. CEOs are being replaced. 

Tariffs will be a catalyst for other changes to occur. It's providing cover for a lot of activity that's probably been needed for quite some time.

April Market Recap

The TSX Index was down -0.30% in the month of April, up 0.46% YTD and 14.40% over the past year. Canadian GDP was up 0.6% in the fourth quarter of 2025 and 2.40% for the full year; in the USA the GDP was up 2.4% for the fourth quarter and 2.50% for the full year. Canadian inflation rate was 2.30% annually in April 2025 and the US annual rate was 2.40% in April 2025. 

The best performer of April was Galaxy Digital Holdings Ltd (GLXY) whose stock price was up 44.5% on the month, down -12.3% year-to-date, and up 81.2% over the past year.

The second best performer of April was Andlauer Healthcare Group Inc (AND) whose stock price was up 37.2% on the month, up 26.8% year-to-date, and up 28.3% over the past year.

The third best performer of April was Kinaxis Inc (KXS) whose stock price was up 17.3% on the month, up 7.5% year-to-date, and up 27.0% over the past year.
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We've seen a big rally from the bottoms of liberation day in early April, almost 20% in the S&P. On the S&P, we're now in positive territory YTD. The TSX is up 3% YTD.

She gets that the worst-case scenario is no longer priced into the market with the 90-day pause on tariffs. But there's still a lot more to unfold. When she looks at the economy, the data coming out is not looking great. It's mixed, at best. Then there are other things like increasing geopolitical risk. 

In Canada, consumer confidence is coming down. Housing starts are the lowest they've been since 2009. Job numbers are not great, unemployment is starting to tick up, and that's without the impact of tariffs yet. Highly indebted consumer. Mortgage prices will come up as they get rolled over.

In the US, consumer confidence has really plummeted since Trump was elected. Retail numbers were OK, but the number released this morning reflects a lot of pre-tariff surge in buying. Manufacturing is in contraction territory.

The economy is murky at best. We're already seeing softening GDP numbers in both Canada and the US. She wouldn't be surprised if Canada's already in a recession or at the start of one, and we're just waiting for those data prints to come out. In the US employment's still strong, but the main hiring has been done by government; with DOGE, not sure if government jobs are going to come to the rescue this time.

Not much to be excited about with respect to the overall market. But there are particular areas of the market she's excited about, which are more conservative and stable. That's where she's putting her focus.

On the overall market optimism, she and her team are a bit skeptical.

Doesn't own any right now. She's not confident on consumer spending and the retail space. The rental space would be interesting, but none of the particular companies capture her attention yet. Industrials already had their day during the pandemic -- cheap space, easy to replicate, and prices will come down.

Hard not to own them, but she is underweight the sector. There's going to be some increase to credit loss provisions. Set up well for a recession in Canada, but she'll be keeping her eye on any particular weaknesses this quarter.

He's diversified globally. In a 30-stock portfolio, he'll have 4 Canada, 13 US, and 13 international. We had the risk-off period when all the fear from tariffs was out there. And now we've had this big market rally back, given that they want to reduce tariffs. The moral of the story there is that you cannot time the markets. So don't be sitting in cash, you have to be invested because of what happened Monday, when we had a 1-day rally of 3-4%.

Be diversified. Whether we get stagflation and rates go higher, or a bull market again with rates going down, you still have to be invested.

It doesn't matter where a company is domiciled, it's where the revenue streams are coming from. Look at the companies, not just at the price.

When you're thinking about buying a stock, you have to answer 3 questions. 

1. Why am I buying this stock? Need to write down 5 reasons why. What do they do, what are the metrics, what is the future for them?
2. What are the risks involved with holding the stock?
3. How does it fit in my portfolio? You want to avoid correlation risk as much as possible.

It gets you through the slow times, the bad times, the down markets, the recessions. Companies that can earn a return on invested capital (net operating earnings after tax compared to the amount of capital that's invested) is a huge sign of how management's allocating capital -- well or not.

There are lots of tools out there for investors to check this themselves -- annual reports and financial websites.

A metric he focuses on. In your own life, if you have money left over after all the bills are paid, you then have financial flexibility. To learn more, the December newsletter on his website explains what they do, why they do it, and why they're not going to change. The March newsletter talks about risk on/risk off, and how investors have to deal with the volatility. Go to libertyiim.com.

Diversification is the most important thing. In a risk-off scenario, inflation and interest rates are rising but stock markets will go down. Interest rates go down, markets go up.

He thinks of himself as a financial contractor -- tell him what you want, and he'll build it for you. Do the financial plan first, and then create the portfolio. Structure, discipline, non-correlation, and diversified throughout the world. Plus bonds. For him, there have to be significant red flags to sell a stock.

Market Update:

2025 has been a roller-coaster year, starting with the surprisingly forward move from the U.S.’s new administration, led by President Trump, that announced meaningful tariffs with various trading partners. This policy led to a meaningful decline across indices, along with tremendous uncertainty regarding the future outcome of the trade war and how this would affect the economy and companies’ earnings. 

As of mid-May, the heat between the U.S. and China seems to have slightly tempered, which led to a market rally across sectors, especially in the large-cap sector, which in some cases has quickly and fully recovered the losses from April. The astronomical tariff numbers that were as high as 145%, made the market turn to panic sell-off mode, are now looking more like negotiating tactics between countries. Although there is still uncertainty regarding the trade war, the trade negotiations are progressing positively, and we think the worst is probably behind us.

Historically, small-cap stocks tend to be the hardest hit and also may take some time to recover. In the current environment of an early recovery, we think investors can still find many high-quality Canadian small-cap names with solid fundamentals in terms of growth prospects and returns on equity, and yet are trading at an attractive discount relative to US peers. With this macro backdrop of easing trade war and a pending interest rate cut from central banks, we think small-caps in general would have room to run to narrow the discount in valuation compared to large-caps in general.
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By now, we know that Trump is an interesting character who manages by chaos, keeping people off balance. Investors must know that volatility will stay during his term, and tariffs weren't the volatility, but Trump himself. Tariffs are the trigger, and Trump the gun. Corporate America came into this Presidency strong and has remained strong, despite all that's been thrown at it. But there's been a drop in confidence among consumers and boardrooms, which hasn't effected earnings yet--and it may not, because Trump keeps swinging back and forth. As of last Friday, 78% of reporting S&P companies reported positive surprises. Valuation is on the mark for a 5-year average.