Donald Trump will be almost as consequential for Canadian personal finance this year as our next prime minister.
What happens in the U.S. has always had a big impact on the Canadian economy, but Mr. Trump’s presidency will be special.
Mr. Trump’s threat of tariffs on Canadian goods could at worst bring a recession with major job losses. Aside from that, his economic policies will affect mortgage rates and the performance of your investments. Here’s a checklist of things to consider for your investments:
* Tax-free savings account: If you’re feeling nervous, consider keeping your 2025 contribution in a cash-type investment like a money market or high-interest savings fund. If stocks tank, you have the opportunity to buy at marked-down prices. Or, consider adding your TFSA cash to the market in increments through the year ahead.
* Registered retirement savings plan: Keep calm and carry on if retirement is five-to-10 years away or more. We have yet to see a world event that the stock market cannot recover from, though it could take a few years.
* Registered retirement income fund: Keeping RRIF cash on hand to cover at least two-years’ worth of mandatory withdrawals is a no-brainer. Do not put yourself in the position of having to sell fallen stocks, bonds or funds that have fallen in value. Keep the money in GICs or cash-type investments like money market or high-interest savings funds. These products still offer inflation-beating returns.
* Registered education savings plans: It’s time to dial down the risk in an RESP for a child who is in the final two years of high school. Forget bonds or bond funds – they can fall in value. Consider guaranteed investment certificates maturing during the summer, in time to pay tuition costs. Or, cash-type investments like money market or high-interest savings funds. If you want to keep aiming for some growth in an RESP, consider a small weighting in stocks that contains the risk of a correction occurring when your child needs cash for school.
* First home savings account: It’s a gamble to invest in stocks and even bonds if you plan to buy a house within five years. Consider cash-equivalents because they can be redeemed quickly if you find the right home in a hurry. Longer-term buyers can add stocks to their holdings for growth.