Elections, tariffs, wars, and economic uncertainty appear to be creating a lot of anxiety. This might be a good time to keep it simple, ignore all the noise, and take a look at some data.

The chart below is simple. It shows the forward price-to-earnings (P/E) ratio of equities in Canada, the US, international markets, and emerging markets. As you can see, all of the equity markets except for the US are trading at or near their 10-year average P/E. The US is trading at 20.5x price-to-earnings, while its 10-year average is 18.5x. The point behind this is to show that markets are not overpriced. Even the US is only modestly above its historical average, especially considering it had higher earnings growth than any other markets over the last two years.

Next week we will find out exactly how extensive or targeted the US tariffs will be, and which industries will be most affected. It’s important to understand that some industries will benefit, and others will not. A properly diversified portfolio will have investments that do the same. Remember the news outlets and social media will only talk about the most negative and dramatic impacts from the tariffs. They won’t talk about anything that ends up benefitting. But we can count on the market to price each industry accordingly – some will go up and some will go down. And we will inevitably be on both sides.

I have also included some commentary from our CIBC Economics team entitled “How Canada should respond to US auto tariffs”.

As always, if you have any questions, please feel free to give us a call.

Have a great weekend.

Milan