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

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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Really important to remind investors that investing is a long game. You wouldn't buy stocks, or a house, with the idea that if you don't like it you'll sell it in 12 months. You need to buy companies that are going to be around for a long time, and that will deliver growth and increase profitability for a long time.

Thinking about that, in the next 12 years there will be 3 presidential elections. In the next 5 years, we'll be talking about other things that might concern us. The companies that he invests in have stood the test of time. Most adults have lived through 9/11, the financial crisis, and the like, and here we are today. Though the financial crisis was only 15 years ago, it feels like 50, yet somehow we managed to get through it and come out even better afterwards.

Track record counts. Look back to how companies performed during down times, recessions and such. Companies that have been able to stay profitable through those times and, for example, pay their dividends, have been able to survive.

If you look at some of the world's great businesses, those large companies also have the capacity to hire the best. SBUX is an example, spending a lot of $$ to hire the guy who previously ran CMG. These companies have the capacity and wherewithal to be agile and make their way through. When Covid happened, SBUX and MCD morphed almost immediately to more takeout and didn't skip a beat.

We're going to have to rely more on the private sector, as government debt levels are close to all-time highs. Probably corporate tax cuts in the US. 

May get some corporate tax cuts in Canada, because there's basically a realization (no matter your political stripe), that Canada needs to be competitive. We're losing investment to the US. He heard a recent statistic that the US invests roughly twice as much per worker as Canada does -- that's one of the main reasons that our productivity is lagging so badly compared to our major competitor and trading partner. We need to fix that.

Doesn't make sense to play the hedging game. After 35 years in the investment business, he has yet to meet anyone who's correctly called the direction for any length of time. 

Plus, misunderstanding that just because something trades on a US exchange that it's purely USD. Companies like MSFT and MCD have revenues in currencies from all over the world. If you try to hedge, you may actually over-hedge USD exposure, and just guessing doesn't make any sense.

When you own equities, accept the fact that you have currency diversification and you're going to have some ups and downs due to currency moves.

Best option is to look for an international name that trades in the States as an ADR. You could get exposure to Europe this way.

Consumer staples are outperforming in the last few days, and that speaks to the advantage of having a balanced portfolio. Companies like KHC, UL, KVUE, and Nestle. It's not that they won't be affected (their costs would go up), but they're far less cyclical than other businesses. Earnings will be much more stable. Earnings could fall 10%, but not 50%. Dividends will be sustained.

Companies like Unilever and Nestle are huge in NA, but huge globally as well.

Whatever happens in the US affects the rest of the world. He wouldn't recommend emerging markets, as they tend to underperform if/when there's a recession. 

Investors would be better off buying the best companies in the German market, rather than the whole German market. Germany's the 4th-largest economy in the world, but it's had a bunch of issues with its own deficit and economic slowdown. He owns specific stocks in Europe. 

He'd sell a stock today if he didn't think it offered upside. By owning a stock, and buying it for new clients, he thinks there's more upside.