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Michael Van Berkel

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GENEVIEVE MORROW

June 17, 2025

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More For Your Money

                                                                                                             2025 - 2/4

 

Bent but not Broken…

They say you always remember your first.  I remember my first…first market correction that is. I was in my final year of university and the first “Dot-Com” bubble was in the process of overheating. To give you an idea of the mood, a then TSX listed gold company had announced they would completely change paths and become an “internet incubator”.  Instantly their valuation doubled. It was a crazy time, but what few realized, or wanted to believe, was that a reckoning was coming. In what would be come to be known as the “Dot-Com Bubble”, the NASDAQ had a 78% correction from the more than 80% rally in the previous run up. What I would learn later in life was that some of the correction was due to a “break” in the fundamentals of the markets. This would happen again in 2008-2009, and then to a lesser extent again in 2020. As an investor, I’ve learned that broken financial markets are often more of a threat to portfolio valuations than more statistically based factors like earnings cycles, interest rates, and even economic indicators. You no doubt have had some concern over the past month or so and I want to assure you that I have been watching for ‘broken’ and while things did bend…they definitely did not break. 

 

Is this normal…?

There are many different indicators that both myself and many other investment professionals look at to monitor ‘normalcy’ on markets, but there are a few that are trusted more than others. To establish a baseline, it’s important to ask, what does normal look like? First, volatility is normal. At the time, it can certainly feel anything but, however, this is a function of efficient markets pricing in very new information. Information that can bring surprising news that catch investors by surprise…say for example a man standing at a podium with a placard of names and numbers. Again, while not fun at the time…certainly normal. 

 

The second normal we look at is correlations. In particular, most asset classes have a tendency to move in a particular direction in relation to other asset classes. For example…typically when the U.S. dollar rallies commodities fall. This is thought to be as a result of so many of the worlds most used commodities being priced and traded in U.S. dollars. More recently we did see some wavering in some of these correlations. Generally speaking, when investors choose to reduce risk as a whole - “risk-off” if you will - we most often see a rally in the U.S. Dollar, and / or the U.S. 10 Year Bond. Through the month of April, we watched, as investors chose to unload risk. However, both the U.S. Dollar and the U.S. 10 Year Bond also fell in value. This certainly did not appear to be normal. It was an anxious time, but fairly quickly this discrepancy has resolved itself. While the U.S. Dollar has yet to recover, and the 10 Year Bond has settled in fairly close to the “panic” levels in April, equity markets have rallied…and as the above would suggest, they should have. It was fairly obvious that much of the money that was sold out of bonds likely ended up in equities. Normal in the context of markets. So, thus far, things appear normal. And while for a few days it looked like things had broken, fundamentals eventually took over leading to an almost complete recovery by U.S. markets. 

 

Economic Statecraft…

More recently I’ve spoken with many of you about the concept of “Economic Statecraft” a term currently being used by an Australian economist (Michael Every) to describe what he believes is the real motive of the current state of global trade. This may also help to explain what happened in April. The concept of Economic Statecraft refers to the idea that large countries, at many times in history, chose to move away from sound economic policy as a motivating factor, instead reverting to economic policy focused more on national security. Rest assured, this is not a new concept. The Romans destroyed trade routes and infrastructure in order to isolate and eventually destroy their adversaries. Not exactly strong “economic” policy. Getting back to the above…while updated for current times, it is possible that a country could choose to sell an asset as a way to negatively impact another country. The potential is certainly there.  Approximately ¼ of all U.S. debt is held outside of the U.S.. The largest being the countries of China and Japan. A large sell by either of those two would almost certainly cause a precipitous rise in U.S. interest rates. The motive in this case would be to drive interest rates higher in the U.S., causing chaos in the housing and debt markets. While this may seem like a far flung conspiracy theory, I think it would be irresponsible to simply dismiss the concept. It certainly appears that one of the world’s two largest trading partners is not above making rash decisions that seem to lack sound economic principles. I think it’s important to mention that I’m not really into conspiracy theories. Personally I believe the world is far too much of a ‘runaway train’ to be able to control and / or manipulate with any consistent

 

success. That said, I wanted to draw attention to the likelihood that much of what we are dealing with in markets today are in many ways not what would we consider sound economic policy, but instead, are moves to attempt to extend the American hegemony*. 

 

Moving Forward…

I understand that we may be giving credit where it may not be due, however, I do think that the regardless of the motive, the current policies coming out of Washington will have some very definite long term affects. As the current U.S. administration works to strong arm their trading partners into better deals for them, it’s likely there will be differing effects in the short and long term. In the short run, I do believe it will be more of the same. Countries will have a hard time not trading with one of either China or the U.S., as they currently account for somewhere north of 50% of all global consumption. Both of these countries are fuelling the incredibly large buildout in technology infrastructure…something most of the world is just trying to keep up with. At the same time, in the long run, countries like Canada will likely take this as a proverbial “kick in the pants” and become far more motivated to develop new trade routes and eliminate barriers. While it will take time and a great deal of investment to forge these new trade routes, many countries are realizing that their trading partners are perhaps not such great friends. The proverbial “cutting off your nose to spite your face”. While there is no crystal ball as it relates to investing, I do think it’s clear that we are heading into different, but certainly not uncharted waters.

 

Tips and Tricks from the Admins…

As excited as we are for the summer sun, we still need to prepare for a rainy day. One of our favourite indoor activities is heading to the theatres. The best blockbusters always come out in the summer! Here’s a list of the ones we are looking forward to the most.

  • 28 Years Later
  • F1 The Movie
  • Jurassic World Rebirth
  • Superman
  • Fantastic 4: The First Steps
  • How to Train Your Dragon

 

Angela, Helen and Gigi

 

The Closing Bell…

While it’s been a tumultuous time over the last few months, I must say that you, our clients,  have showed great poise. It is amazing what past markets can teach us in terms of behaviour, and what it takes to be great investors. It’s always tough to know what’s ahead, but like most of us, financial markets being no exception, summer will likely bring some calm, as peoples’ attention move from world events to more important things like family, friends and fun. I hope you all have an amazing summer and I look forward to hearing about all of your great experiences.

 

 

“Rest is not idleness, and to lie sometimes on the grass under trees on a summer's day, listening to the murmur of the water, or watching the clouds float across the sky, is by no means a waste of time.”

 

John Lubbock

 

 

 

 

* leadership or dominance, especially by one country or social group over others

“CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries, through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc..

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2025.

 

Michael Van Berkel is an Investment Advisor with CIBC Wood Gundy in Barrie, Ontario. The views of Michael Van Berkel do not necessarily reflect those of CIBC World Markets Inc. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors..

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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


CIBC Private Wealth services are available to qualified individuals. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license.