Quarterly Strategic Review - First Quarter 2025 – April 2025 – Trump Tariffs!

Well, that was (not) fun! What started as a simple correction in February, turned into a (mini) crash of significant proportion and, on cue, fear surged! You all know that I am a staunch advocate of risk management, but this recent quarter (and into April) has been nothing short of tricky (beyond tricky).

Why? What made this so different? As stocks started to fall, perhaps almost framed by one of our broadest and most widely held stocks, Axon Enterprises ($AXON), which plummeted

-16.4% the same day the S&P 500 made its closing peak, one after another, stocks started to experience more supply than demand. Trend-following requires a level of humility and an acceptance that the market knows more than you and (yes, for sure, even) I. I cannot stress enough that when you are emotional about the news, or the events, or the factors that may (or may not) lead to stock market volatility, those headlines or soundbites are NOT novel at that point. They’re well-known and there are people all over the world, Ph.Ds and traders and algorithms and hedge funds and pension fund managers and politicians, all trying to gauge what is to happen. By the time you are worried about something, you must realize that everyone else already is. As such, weakness has taken place, but ‘buy low’ works, doesn’t it?

Trump Tariffs and Armchair Politics

I have never, in all of my years sitting in my seat, seen such divide and I am admittedly very concerned at the continued control many global governments (and certainly, their funded media outlets) can put on each of us. Media is designed to fan the flames, create and stoke fear and help pitch a narrative that meets those that fund it (today, that’s our government(s)). For those of you reading this who think Trump is ruining everything, I encourage you to contemplate a different reality. These tariffs (which we too have had and used and applied to protect some of our own industries (think agriculture, milk and so forth), have these threatened tariffs led to a stronger Canadian dollar? And a stronger Canadian stock market? Yes, and yes. I know it is impossible for that to make sense to some of you. But my point exactly.

As the U.S. focuses on finding ways to increase their own employment and economic balance, eliminate and reduce needless waste of spending (remember, they have $36.7 trillion in debt), they’re contemplating eliminating income taxes for those that make less than $150,000/year to ZERO. Zero!? Can you imagine if Canada, one of the most highly taxed nations on Earth, moved towards a scheme like that? In Ontario, the highest marginal tax rate is almost 54% (most Americans can’t believe that our taxes are that high).

I think it’s reasonable to assume that we do not yet know what all these tariffs (real and threatened) will mean to the spectrum of companies and countries. It’s going to take time for businesses to adjust and to recalibrate, and that will mean uncertainty. There will be winners and, no doubt, losers, as the chips fall.

The Markets

I thought this S&P 500 chart over the past 50 years (credit @allstarcharts) might help with perspective, because right after peak fear (after three days in a row of seeing U.S. stocks fall pretty much -5% per day on April 3, 4 and 7), we had the biggest price surge (>9% in one day). It’s a good demonstration of imbalance, where overwhelming supply and stock market weakness with rampant fear is in place, and then, when the last seller has sold, the panicking investor has decided they must sell their portfolio (and yes, sadly, I had one client who capitulated right at the low and before this day). We see that, just like an overly stretched elastic band, demand overwhelms and comes zooming back, leaving many scratching their heads and trying to make sense of why investors would want to buy.

There are four days (over the past 50 years) when we’ve seen a surge in U.S. stocks greater than +9% in a single day. Look at the chart below and the vertical lines. Did these events come before the market was about to plummet? No, they all came after significant weakness and well-chorused and broadly-held fears. Does it mean stocks will only go up from here? No, most definitely not. But does it mean that I will continue to carefully evaluate market conditions and decide how best to allocate our capital to navigate those changing global conditions and uncertainties? Always.

The Launch of the AllINsync Pool

I couldn’t be more pleased to have finally launched the #AllINsync pool, this past quarter. While the drawdown that started almost immediately as the markets reversed course, sure isn’t what I would have choreographed, I don’t get a choice in the matter. Experiencing the most challenging market to navigate in many years isn’t typically on my wishlist either, but we don’t get to choose what the market does, and it certainly doesn’t care what I think.

Almost all clients (except for those of you who don’t reside in Canada) have exposure to #AllINsync – aggressive clients and conservative clients alike (and yes, of course, that means me!). Different proportions perhaps, but I’d encourage you to continue to perceive the pool as the core equity exposure at the heart of your own investment strategy. Unlike in the old days (at the bank), I’m not stuck or pigeon-holed into owning a certain kind of stocks or ETFs, but instead can use the many and wide set of tools that exist as the environment unfolds. I can make decisions very quickly in ways that weren’t feasible before.

For example, amidst this weakness, we added to a number of our large-cap stocks, stocks that meet the #INsyncUniverse screen, the stocks with long histories of doing better than the market and I can add +1% here, or 2% there and build our positions as the stocks flash reasons to do so. Not practical before, and more finely tuned. [As a note, the increased efficiency afforded by having #AllINsync is leading to other positive works in progress, namely the use of INvertigo as a model-driven portfolio (to complement core #AllINsync equity) and next up is to more broadly use model implementations for U.S. clients].

As I saw and proclaimed that the Canadian dollar appeared to be bottoming when the threat of tariffs first emerged in early February, we started to reduce our foreign currency exposure and, not coincidentally, started to increase our non-U.S. equity exposure. Had we not done this, the weakness we experienced would have been worse. AllINsync is currently sitting with approximately 75% Canadian dollar exposure overall, a drastic change from the past couple of years.

A Few Reminders & Closing Thoughts

AllINsync has brought tremendous advantages to us, as investors, going forward. But there are a few particulars that are different, in fact, very different than what we’ve been used to. Please remember, and know, that the pool is only valued at the closing price each Tuesday and at month-end. That means, buys and sells can be done on these valuation dates only (those values are not shown in your account until typically two days afterwards). As I write this, on Wednesday (April 16), yesterday’s NAV has not yet been made official and I usually receive such information in the afternoon, after which it will be posted tonight (as at Tuesday). So, if you happen to be looking at your account at a random point in time, it can be significantly out of date. But I, of course, always know where we stand!

This past week, we’ve had the biggest weekly gain yet (+6%), as our portfolio bounced back with the market, after fear subsided (not saying it’s gone though!!!).

I have been sending out a monthly “AllINsync Monthly INsights” factsheet that you all should have seen by now and it contains some strategic comments, shows our top holdings and how we’re exposed, which, you’ve broadly told me, works well and is useful. A few of you have also been receiving more frequent (weekly) comments that dive into things in greater detail (if you’re wondering about this, please ask).

There have been many times over the course of my 20+ year career as a Portfolio Manager when important and significant market-moving events have taken place and the past couple of months have indeed been one of those times. In all of those past circumstances (the most recent before now was during the COVID crash), many decisions get made and the goal, as always, is to smooth out the path from the lower left to the upper right for your investment portfolios (which contributes to the bigger and broader path of your overall net worth), which contributes to providing financial security in accordance with your own goals and objectives. I never take this responsibility lightly, nor for granted, and am tremendously grateful for your trust. There have been times I’ve made selloffs look simple (to sidestep), but these past few months have not been one of those times. Tricky come and tricky go!

Your feedback, questions and/or comments are always welcome!

Sincerely,

David Cox, CFA, CMT, FMA, FCSI, BMath
Senior Portfolio Manager, Wealth Advisor
Raymond James Ltd.
Phone: 519.883.6031
Unit 1 – 595 Parkside Drive I Waterloo, ON I N2L 0C7
www.financiallyinsync.com
 @DavidCoxRJ

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