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

He's preparing for an "anything can happen" environment. A medium- to long-term trade war is definitely in the cards as a possibility. A number of nations might agree to the US terms just to protect their economies. There will be some that will hold out.

It's a coin toss here, and there's no doubt that it'll affect the global economy. GDP numbers in the US came in a little bit light. It may be largely because companies and individuals imported a lot more than they produced in Q1, just to get ahead of tariffs. There's been a lot of disruption out there.

His firm has definitely gotten defensive. July 1 will be another big day for Trump to unveil what he's going to do with the counter-tariff measures.

No, not due to the Canadian election. The fact that it's done is probably a good thing for Canada, the economy, and international investment in Canada. All the drama that preceded and surrounded the election created great uncertainty, and markets just don't like uncertainty.

This minority government might be a good thing, perhaps some of the Conservative agenda items will get through. So all in, we got a decent result and added some stability to Canada that we desperately needed.

With rates going down, you could consider a fixed-rate preferred. He's been buying POW.PR.D, yielding about 6.1%. Beauty of it is that it doesn't reset, it's perpetual. So if the BOC moves rates lower, these preferred shares won't reset to a lower level. Gets more valuable as the BOC lowers interest rates.

You'd be buying a fixed-rate preferred share. Those with the highest yields are definitely not the banks. You could try POW.PR.D, for example. With the non-banks, the credit quality is going to be lower that what a Canadian bank would be. You can search online for a table listing the comparable yields.

You have to be careful with the lower-quality issuers. Don't want to get caught offside, especially if this is your retirement money. The dividend yield you get is tax-advantaged if outside a registered plan. But remember that there's price volatility. If prices come off, prices will shoot up but won't benefit you much because your investment amount is going to go down. These are not like bonds that keep their stable price; instead, they fluctuate in value.

It's time for the USD to rally. Currently, it is very undervalued while gold has been rallying and the economy has been declining. The disparity between USD and gold is historically extreme. Also, look at the chart for commercial hedgers: the last time they went extremely long was in early 2021, which led to a sharp USD rally in 2022. Hedgers are extreme now, which suggests a USD rebound ahead. Thirdly, sentiment by analysts and newsletter writers is very bearish. Also, Williams' cycle forecast indicates a dominant cycle tends to last 32-35 weeks, and it's time for the USD to roar from now into September.

Increased withholding taxes

There is a new bill proposed in the U.S. government that would increase withholding taxes on U.S. investments to Canadian investors. If passed, the proposed legislation would add five percentage points to the withholding tax rate each year for four years on certain types of U.S. income to Canadians. The bill appears to be in response to Canada’s digital services tax imposed on large U.S. technology companies last year. While the bill does not have a great chance of being passed (we hope), just the fact that the U.S. is contemplating such moves at a time when capital is already fleeing the country is quite ridiculous. Valuations in other markets remain cheaper than in the U.S., and if taxes to international investors increase there is even more incentive for investors to move money out of the country. Countries are supposed to attract capital for growth, not push it away. This is Economics 101.
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The Canadian election results were not surprising, given the polls, so the TSX isn't reacting much today. Trump will announce changes to car tariffs today: well, Trump changes everyday and he puts little faith in what Trump says. His bark is bigger than his bite--he will keep backtracking, because business leader, bond traders and former business partners will keep pushing back. No one but his own administration agrees with this trade war. He's done lasting damage to relationships and economies, but mostly to the US itself. He's created animosity towards the US with his hostile words and tariff threats, and other countries have retaliated with tariffs, boycotting US products, cancelling travel plans while big investors are selling US stocks and bonds. It's immeasurable the damage he's caused on the US as a global leader in politics, economics and the social sphere. Former allies are already seeking other trading partners. You can't trust anything Trump says. Canada: A Liberal minority is good, because it will force the Liberals to come much closer to the centre and find unity with all Canada and void polarisation that has hurt America. All Canadian parties and provinces will work together to strengthen Canada, like removing interprovincial barriers and approve projects faster. We have the right man to head the country (Carney) with his experience--the right guy at the right time, and Canada voted for the person, not the party.

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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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.