Stocks have fallen sharply in recent days, with investors nervous about the impact of U.S. tariff policy.zoom-zoom/iStockPhoto / Getty Images
The escalating global trade war – particularly between the U.S. and Canada – has sent stocks tumbling in recent days amid fears of a recession across North America.
U.S. stocks closed lower on Tuesday, with the S&P 500 entering correction territory before reducing the scale of those losses. The Nasdaq Composite confirmed a 10-per-cent correction late last week and fell again on Tuesday, and the S&P/TSX Composite Index also lost ground again.
The Globe and Mail asked money managers how they’re navigating the market mayhem under U.S President Donald Trump, and whether it’s time to “buy the dip” or to take cover.
Craig Jerusalim, senior portfolio manager at CIBC Asset Management Inc.
“Market timing is unfruitful at the best of times and almost impossible under a President Trump-fuelled tweet storm,” Mr. Jerusalim says.
What comforts him is the stability of earnings expectations for many companies on the S&P/TSX Composite Index and S&P 500.
“We will be paying close attention to ongoing earnings revisions but, as of right now, our base case is for a more run-of-the-mill correction as opposed to a more severe 20-per-cent bear market,” Mr. Jerusalim says.
Meanwhile, the Canadian-focused money manager has been buying hard-hit companies on the S&P/TSX Composite Index that he expects to rebound the fastest and to the greatest extent. These include companies with strong balance sheets, limited direct or indirect tariff exposure, positive operating momentum and low economic sensitivity.
Some of the companies he’s been adding to recently include: DRI Healthcare Trust DRI-UN-T, GFL Environmental Inc. GFL-T, Trisura Group Ltd. TSU-T, Fairfax Financial Holdings Ltd. FFH-T and Cameco Corp. CCO-T.
“These companies may fall further. However, the key is our conviction will keep rising the lower their price goes,” he says.
Brianne Gardner, senior wealth adviser and co-founder of Velocity Investment Partners at Raymond James Ltd.
Ms. Gardner points to the latest American Association of Individual Investors survey showing 19 per cent of investors are bullish while 57 per cent are bearish.
“That’s extreme,” she says. “Historically, when pessimism gets this high, it’s often a signal to start looking for opportunities.”
But she’s not buying just yet.
“An economic growth scare could still be around the corner, which might give us an even better entry point,” she says. “When we do buy, we’re looking for quality [companies] and assessing their future, not just the past performance. Not all stocks rebound if their outlooks are impacted severely.”
She’ll look for companies with strong balance sheets, stable cash flows, and in defensive sectors such as health care, utilities, consumer staples and materials that can weather uncertainty.
Meanwhile, she’s doing a bit of trading, including shifting some equities into fixed income.
“We raised a bit of cash in February and are still keeping some dry powder,” she says. “Cash gives flexibility, and with the next big tariff decision in early April, we expect more volatility ahead. If the market overreacts, we want to be ready to step in at better prices.”
Jason Donville, president and chief executive officer of Donville Kent Asset Management Inc.
“Now is not the time to buy the dip,” says Mr. Donville, who notes the current round of tariffs involves China, Canada and Mexico, and will soon include other trading partners. “So, we think things get worse before they stabilize.”
Mr. Donville believes Mr. Trump’s tariff policies will ultimately have to be abandoned because the tariffs will raise the cost of goods dramatically on imported products for U.S. consumers and reduce the demand for U.S. products in which countervailing measures are taken.
“However, the folly of Trump’s strategy has to play out first, meaning the pain has to hit first,” he says.
Mr. Donville says his team is standing pat with its long-term growth and technology-focused portfolio.
Paul Harris, partner and portfolio manager at Harris Douglas Asset Management Inc.
Mr. Harris says the markets – and Mr. Trump – are too volatile and unpredictable right now to decide whether to buy the dip. The longer things remain erratic, the more markets will gyrate.
“We’re in for more volatility, and because businesses are standing still, not making decisions, we’re probably moving to slower growth,” Mr. Harris says.
In the meantime, amid the chaos, he’ll watch for opportunities to buy companies he likes – such as large-cap technology and U.S. financials – trading for cheap.
“If this continues, the U.S. economy will slow down or possibly go into recession and [interest] rates will fall, making interest-sensitive stocks also a buy,” he says.
Rebecca Teltscher, portfolio manager at Newhaven Asset Management Inc.
Ms. Teltscher, whose firm invests in dividend-paying Canadian companies in sectors such as utilities, infrastructure, energy and financial services, isn’t ready to buy into the broader market at current levels.
“During times like these, our portfolio tends to remind us why we invest the way we invest,” she says, adding her roster of stocks was largely up on Monday when the market tanked.
“The market has been running almost exclusively on the AI trade since late 2022 and we feel it has created a significant bubble,” she says. “We’re now seeing that thesis tested not only by all the uncertainty of the Trump administration’s haphazard policy shifts but also by the breakthroughs in China that have shifted the expectations of cost and profitability of AI.”
Adds Ms. Teltscher: “For now, we are happy with our current positioning.”