Amid tariff threats, some investors are reducing exposure to Canadian equities.Paige Taylor White/The Canadian Press
During another destabilizing week in what’s turning out to be a rather unhinged year, David Tulk described a relatable new investment approach.
“I can’t take credit for this line, but I think the best strategy today is long confusion and short conviction,” said Mr. Tulk, global asset allocation portfolio manager with Fidelity Investments, at a Morningstar Inc. event in Toronto on Wednesday.
Mr. Tulk was joking (not investment advice). But the line captured the mood on Day 2 of 25-per-cent tariffs, as the S&P 500 zigged and zagged, reacting to news and policy shifts, and investors tried to get a read on exactly what was happening, why, and for how long. (Not very long at all, it turned out, as U.S. President Donald Trump on Thursday again put the tariffs on hold, this time until April 2.)
The panelists at the Morningstar event speculated about the possible impact of tariffs in Canada – a big hit to growth and a potential uptick in inflation; maybe even the dreaded “stagflation” – should they materialize and last.
On that point, Stephen Lingard, CI Asset Management’s co-head of multi-asset, wasn’t sure President Trump’s administration had the stomach to follow through.
“The voting machine that is the S&P is probably more important,” Mr. Lingard said.
He spoke about reducing his home bias in Canadian equities, but all the panelists cautioned about short-term moves.
As David Sekera, Morningstar’s chief U.S. market strategist, put it, “The situation is just too fluid to make any general valuation changes at this point.”
The panelists also offered views on longer-term trends, including the fading dominance of expensive U.S. tech stocks and opportunities in other, long-neglected markets.
Mr. Lingard said the emergence of Chinese AI firm DeepSeek was a “huge wake-up call” that changes the conversation about U.S. tech stocks being “unassailable.”
Mr. Tulk pointed to cheap European and emerging markets, with co-ordinated government spending in Europe to distance the continent from U.S. influence a potential catalyst that rectifies valuation differences.
Mr. Sekera said he’s overweight value stocks and looking at mispriced small caps, in particular.
“They haven’t worked yet. They probably may not even work for the next couple of quarters until we really start seeing the U.S. economy rate of growth bottom out and start coming back up again,” he said. But he added investors should be ready.
“Once small caps do start to work, they start to work very quickly. So, if you’re not invested in small caps, you may have a hard time catching up,” he said.
All three panelists also spoke about the importance of stock picking as the momentum trade on U.S. large caps starts to unwind.
Mr. Sekera said he’s long been skeptical about claims of a stock picker’s market: “I always thought that was just a really dumb comment. Well, here I am now saying, ‘You know what, this is a stock picker’s market.‘”
He said mega-cap stocks have skewed indexes, both broad-based and sectoral. Tesla Inc. TSLA-Q, for example, made the consumer cyclical sector expensive but there are a lot of attractive companies in that space for stock pickers to find.
The same goes for the consumer defensive sector, where he says Walmart Inc. WMT-N and Costco Wholesale Corp. COST-Q are overvalued but “some of the best value stocks that we see today are all the food companies that have lagged,” such as Kraft Heinz Co. KHC-Q.
“It really requires active management to go in there, steer clear of those for which the pendulum has swung too far, and invest in value,” Mr. Sekera said.
Must reads
The fear: Tariffs have many clients anxious about a potential recession or job loss. Daniel Reale-Chin reports on how advisors can help clients prepare for the worst.
The delay: Investors could receive T3 slips for their investment funds later than usual this year as some investment fund firms review the documents to ensure they’re reporting the correct amount of capital gains to unitholders. Rudy Mezzetta reports on what it means for tax filing.
The bottom line: Wealth management companies that don’t shift their businesses to attract and retain female investors will lose out on a big chunk of business as women’s share of wealth is expected to rise. Gillian Livingston reports on how advisors can respond.
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The risk: Seeing markets tumble is never a pleasant experience, but it’s especially painful for new or soon-to-be retirees, who are watching the value of their nest egg tumble right before their eyes. Meera Raman reports.
The signal: Feeling overwhelmed about the amount of information flooding in about tariffs, not to mention the changing nature of that information? Rob Carrick has five essential numbers that offer a double-dose of investor intelligence: what’s happening in a particular market or sector, and what that says about the broader economy and investing environment.
The housing market: Speaking of which ... Economic threats from the U.S. are reverberating in the Canadian housing market, pushing some prospective homebuyers back to the sidelines after they had waited for months for borrowing costs to drop. Rachelle Younglai reports.