Anil Tahiliani
March 3, 2025
In just five weeks, the new U.S. administration has upended the geopolitical and economic landscape with its "America First" (or perhaps "America Alone") policy. Tearing up existing free trade agreements, publicly chastising allies, and retreating from global cooperation have sent shock waves worldwide. The U.S. now risks being perceived not as the leader of the free world, but as an unpredictable force willing to strong-arm its closest partners.
Despite these disruptions, Canadian and U.S. stock markets have remained surprisingly resilient, experiencing only a modest4% pullback from their peaks this year. Investors seem to be discounting the threat of U.S. tariffs, assuming they are merely a bargaining tool to pressure allies into increasing defence spending or imposing their own tariffs on Chinese goods. However, if these tariffs are enacted and retaliation follows, inflation in the U.S. could surge, consumer spending could falter, and global markets could react sharply with a correction exceeding 10%, fueled by fears of a policy-driven recession.
The duration of a potential trade war remains uncertain. However, history suggests that the U.S. administration is keenly aware of market sentiment and will want to avoid triggering a recession during its term. If a trade war leads to significant market declines, a swift reversal of policy is likely—although with reputational damage on the global stage.
The Bottom Line
Having navigated multiple market crises over my30-year investment career, I’ve observed that the playbook for responding to uncertainty remains the same:
1. Avoid Panic-Driven Decisions.
Market selloffs generate alarming headlines that tempt investors to react emotionally. Stock markets typically overreact in the short term before stabilizing as they digest reality and look ahead to future prospects.
2. Review Your Asset Allocation.
If market uncertainty concerns you, consult your advisor to ensure your portfolio aligns with your investment horizon. As seen during COVID-19, markets tend to rebound ahead of economic recovery, often before conditions show tangible improvement.
3. Capitalize on Market Corrections.
If you have excess cash, major selloffs can present compelling buying opportunities. History has shown that markets recover from crises, whether the Great Financial Crisis of 2008-2009 or the COVID crash of 2020. Attempting to time the exact bottom is difficult, even for professionals.
4. Rely on Professional Guidance.
Your financial advisor can provide an objective perspective, helping you navigate uncertainty with a disciplined approach rather than emotion-driven reactions.
At Matco, we remain at least 95% invested across our funds and separately managed mandates. Our portfolio managers continuously assess sector and company-level exposures to mitigate potential risks from a trade war. We prioritize high-quality companies with strong balance sheets, ensuring resilience against economic shocks.
If you have any questions about your portfolio, please reach out to your Matco portfolio manager. We are here to guide you through uncertainty with a steady, long-term perspective.
