Larry Berman CFA, CMT, CTA

We could see tomorrow by 10 am that they're not going to start. He believes Canada has a lame-duck government at the moment, so what's our negotiating point? Trump probably sees Canada as vulnerable, more so than Mexico at this point, and Canada's more of a friend to China than he would like to see.

Trump's going to choose to be a bully at this point, not unlike what he's trying to do with Russia and Ukraine. Somewhat embarrassing events at the White House on Friday. Brought tears to his eyes in a sense, because while there are a lot of things broken that Trump's trying to fix, his style leaves a lot to be desired.

We can expect a few more things to be broken before they get cleaned up, and that means more market volatility overall.

Is he trying to do better than last time? Or just trying to do a deal because that's in his DNA? It's TBD. It won't be until we get a new leader in Canada, and a new mandate, that we can see solutions. 

Is the Canadian government going to fall right away? Will there be a confidence motion with the spring budget? Or are we going to wait until later in the year for the expected fall election? We probably need an election now to be able to get to the table with the US. That'll be interesting to watch in the coming weeks, but right now Canada's on its heels.

Mathematically it will, and we're already starting to see that. The Atlanta Fed is now forecasting a negative Q1 for US trade. There was a huge amount of front-running in the US to get ahead of these tariffs.

There's no doubt that the economy's slowing. Tariffs are not bullish. The question is the mechanics and the numbers. Right now, they're a headwind. In the short run more market volatility, but we haven't broken any trading ranges. We'll continue bouncing around within the range until that range breaks to the downside by another 3%, taking out the lows made in early November, or until we can make a higher high. A week and a half ago, the S&P made a higher high on an intraday basis, and then failed miserably.

The market's grinding here, looking for what the future will hold. Now there seem to be more headwinds than not.

If you're a business leader in the manufacturing space, and a big part of your sales go to the US, you're very concerned about your business. Our supply chain is going to rebalance. He's not sure there's going to be enough replacement capacity built in the US in the next 6 months to replace what's going to be lost.

It'll be temporary, not a permanent hit. But really depends on what the ultimate deal turns out to be. In the long run, Canada and US and Mexico are close allies, and to think of it any other way is naive.

Hard to know the answer without digging further. And what are the tax implications? Sounds like 100% equity portfolio, and right away that's a big problem for people at that age. Even someone in their late 60s or 70s shouldn't have an all-equity portfolio. 

There really isn't a good way to get equity exposure without a lot of risk. He imagines a portfolio like this would have seen major shocks in crises such as Covid or the great financial crisis. 

As well, the CAD is really weak right now, so it's not a great time to buy foreign securities. There are ETFs such as ZWE that provide international exposure with covered calls and such. But a lot of that return won't get the favourable tax treatment that you would from a Canadian corporation.

Strongly suggests the investors sit down with a financial adviser and scope out the after-tax return. There's a lot to unpack in this question.

Problem with inflation-indexed bonds is that when inflation is expected to go up, they can perform really well if inflation does actually go up. But if the market anticipates inflation rising, and it doesn't, these bonds perform horribly. 

The average investor shouldn't touch them. Leave them to the professionals.

Problem with inflation-indexed bonds is that when inflation is expected to go up, they can perform really well if inflation does actually go up. But if the market anticipates inflation rising, and it doesn't, these bonds perform horribly. 

The average investor shouldn't touch them. Leave them to the professionals.

Yes. He's invested in this asset class. You could look at ZCLN, which has performed absolutely horribly over the last year. Green energy really did well in the first couple of years of the Biden administration, and then it didn't. 

This one's getting cheap, on his radar to add to. Something may be cheap, but you always need a catalyst to get it going again. He needs to see how Trump behaves towards this sector over the next 6-12 months.

He's always a fan of high-quality corporate bonds because they pay you more than government bonds. But right now, credit spreads are very tight. So though you're getting paid a bit more, credit performs poorly if we go into a hard economic landing. 

Money market is fine. But the BOC has been cutting rates and will likely continue, especially if tariffs have a meaningful impact on the Canadian economy. You'll get less and less of a safe yield.

He really likes private credit, such as residential mortgage funds -- you tend to get monthly liquidity, but yields in the 6-8% range. There are probably ~300 such funds, so go for the big ones with 100's of millions of $$ in them -- safety plus a real rate of return.

Floating rate notes tend to do very well in general when yields are rising. No price change over the last 5 years, but you're earning about 5.5% right now. Doesn't love that credit spreads are really tight, and that this brings the risk of high yield. This fund won't protect you from widening credit spread in a hard landing, so you have more risk than you think.

Have a look at private mortgage companies and residential exposure -- better protection, diversification, and yield.

Not sure if tariffs would be applied to this type of cross-border energy. Hit along with all the other clean energy. Likes it here. Nibbling on weakness. Compelling yield. Doesn't see a lot of upside, capped in mid-$20s for next 3-5 years.

Options Market

He pays a lot of attention to this. Since they've gone to the zero-day-to-expiry options for the main indexes, it's caused and added a lot of volatility to markets.

Late in the trading day on Friday was posted the risk for the day's options. It showed a massive amount of open interest at 5900, 5910, and 5920. As the market was breaking to new highs, with about an hour left in the trading day, the market makers were defending those highs. Then a series of headlines from the US Treasury hit the tape. Today, most of Friday's rally was wiped out, and we're actually now making lower lows on the day.

If you look at the trends, the percentage of the daily option volume has grown along with political uncertainty, White House rhetoric, and tariff risk. There's far more use of these options, but also a more significant portion of these options are being written from zero to 1 week, very short term. It all leads to more volatility and speculation.

Investors need to get used to this. It's going to be very whippy, even for those who are technical traders. You have to pay attention to the options market, as it's going to be an added factor going forward. This can be a useful tool for day traders.

What you don't want to do is change your portfolio day-to-day by what comes out of the White House. Your portfolio should be set for your longer-term strategic goals, and not pay attention to the noise even though that's hard. 

This week, Nvidia's earnings will pull a lot of investor attention, but last week Microsoft demonstrated a significant shift in their thinking about their investment in AI. Those two were the cause of last Friday's reversal--will Nvidia confirm MSFT's caution over AI, partially due to DeepSeek? Then, you have volatility about Trump's tariffs and chaos. Any news that questions the status quo of a market priced for perfection will create a lot of volatility. The Mag 7 no longer leads the market. Also, the market has already priced in the chance of only one US Fed cut this year.

BIL is a money-market-oriented ETF. For 2-3 years, look at SHV and SHY, to get interest rate exposure. He doesn't expect the Fed to cut rates for at least 1.5 years.

BIL is a money-market-oriented ETF. For 2-3 years, look at SHV and SHY, to get interest rate exposure. He doesn't expect the Fed to cut rates for at least 1.5 years.