Anil Tahiliani
April 4, 2025
On Thursday, the U.S. administration started a global trade war based on made up tariff figures to punish countries whom President Trump believes has ripped off the U.S. The President’s stated goal is to rebuild the manufacturing base in the United States. So far Canada and China have implemented retaliatory tariffs on U.S. goods.
As a result, the stock market has dropped significantly the last two days due to panic selling. Since the market is trying to determine how many of the new tariffs are a strong-arm negotiating tactic rather than a new U.S. reshoring industrial policy that would take at least a decade to become reality.
There may be more downside pressure on the stock markets over the short term as investors reset their expectations for lower economic and corporate earnings growth. We expect most countries will look to mitigate the impact of the new tariffs and respond in kind and start an accelerated negotiation process to reduce trade tensions. Despite the headlines and short-term uncertainty, looking back two to three years from today, this market correction will be seen as a buying opportunity.
Although investor sentiment has now turned negative on the macro environment, we believe that provides an opportunity for active stock picking to shine during the uncertainty. For example, one of our core portfolio holdings is Dollarama, which has 1,616 locations across Canada and owns a 60%interest in Dollar city a growing discount retailer with 632 locations across Latin America. Dollarama recently expanded into the Australian market with the pending purchase of discount retailer with 392 stores.
Source: CIBC Capital Markets, Matco Financial Inc. as at April 3, 2025.
On Thursday, Dollarama reported better than expected fourth quarter results, and as an outcome, the stock was up 6%. Some key highlights include: year over year sales and earnings per share grew in the mid-teens level, improved profit margins. In addition, they increased their dividend by15% year or year and in the last year repurchased over $1 billion of their shares.
The Bottom Line
Having navigated multiple market crises over my30-year investment career, I have 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 portfolio manager 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 portfolio manager 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 questions about your portfolio, please contact your Matco portfolio manager. We are here to guide you through uncertainty with a steady, long-term perspective.
