We have recently seen accelerated selling in equity markets around the world this week, in the wake of the United States reciprocal tariffs announced on ‘Liberation Day’, April 2^nd. These tariffs by the White House have been levied on just about every country on earth and are widely being panned and questioned by economists and political strategists alike. We wouldn’t expect a Liberation Day parade or a national holiday to follow, but nothing would surprise us at this point.

 

Interestingly, Canada and Mexico managed to get through the latest round somewhat unscathed – at least avoiding any new tariff unpleasantry. It appears the USMCA free trade agreement is being ‘honoured’ to an extent, although last month’s announced tariffs on steel, aluminium and autos persist. A few Republican US Senators and Congressional Representatives have been tabling legislation this week to basically leave Canada alone, so hopefully there’s a good wave of support there to influence the White House, even if the legislation doesn’t make it far.

 

In the 2 trading days since the Wednesday night reciprocal tariff announcements, US and global stock indexes are down -10 to -12%. Canadian stock indexes are down -8%.

 

Our own balanced portfolios and even our 100% equity portfolios are down a fraction of that, however it’s still not a fun environment to endure. We must remember that our portfolios are screened for high quality, good value investments and we’re well diversified – with these characteristics we can hold confidently through short term pricing volatility. If our portfolio allocations have strayed from target because of the price volatility, rebalancing has the effect of trimming our least effected and adding to our most effected positions – buying low and selling high. We would remind clients of our actions in late 2022 and early 2020 after bear markets took hold of stock prices…the buying we did during those difficult times drove strong performance in the ensuing years and our process of targeting ‘coiled springs’ with good potential upside is what we will also do here in 2025.

 

We would also like to remind our clients that we’re feeling the same portfolio-pain as you are – we own the same portfolio components our clients do. Why wouldn’t we – if we do our homework to identify what we think the best portfolio positioning should be, of course we will also invest in that portfolio alongside you. With that we will let our asset allocation and portfolio position rebalancing do the talking here in the coming weeks as the world sorts out where this new world trade order takes us.

 

As we suggested in our note last month our view is that the expensive areas of the market (us mega capitalization technology names like Apple, Microsoft, tesla, Amazon etc) are likely to be far more damaged than our blue-chip value holdings. Those expensive US names are in fact driving much of the headline numbers on market declines in both US and global indices as they’re such a heavy weighting due to their size. That is precisely what has played out with many of those names down nearly -20% this week, double the general market decline and quadruple what our value focused holdings have experienced. You can see why our advisory group has been focusing our attention on value and quality while also shifting our index ETF exposure away from market capitalization weighted (tech heavy) positions over the past 2 years. The scenario we have been building portfolios to protect our clients against is exactly what is unfolding here today.

 

As we noted in March, we’re reacting in a calm and measured fashion - we’re following our investment process that has been honed over decades of experience, and we’re excited to take advantage of new long-term opportunities as they present themselves.