What Can Go Right? Navigating Market Volatility
I have been paying attention to the uncertainty that we are currently living in, and I’m impressed by how many of you have reached out to ask if this is a good time to invest more. My approach to today’s environment is to focus on what I can control within our four walls and adapt only when there is a pivotal change. I also want to share a few strategies and thoughts.
Staying Focused: Must-Use Strategies
Now is a good time to:
- Be systematic—Stick to your investment plan and exploit market fluctuations.
- Maximize your TFSA—This is the best way to invest tax-free if you haven’t started or increased regular contributions.
- Review your insurance coverage—Market downturns and economic shifts remind us why financial protection matters. If you haven’t reviewed your life, critical illness, or disability coverage recently, now is a good time to ensure it aligns with your financial goals.
Long-Term Investment Approach
If you take a long-term investment approach, consider watching for opportunities that could pay off over a three-to-five-year horizon. The 2018 tariffs on metals lasted less than a year, from May 2018 to May 2019. However, this time may differ due to economic and political shifts, including leadership changes and the likelihood of sectoral recessions in Canada.
Historically, market contractions since 1956-57 have averaged -23%. Although this is alarming, what has followed every contraction is a recovery, and within the year following, an average of +38% from the bottom. The managers we have hired will take this opportunity to purchase strong companies and aim to help your portfolio return higher than the market average.
Balancing Power: EU and Russia’s Infrastructure and Military Investments Amid Geopolitical Tensions
The European Union, with a GDP of around $19 trillion USD, is focusing on strengthening its infrastructure and military capabilities. This shift is partly driven by geopolitical tensions and the need to ensure regional stability and security. On the other hand, Russia, with a GDP of approximately $2 trillion USD, is also investing heavily in its military and infrastructure to assert its influence.
As countries adapt to the new economic landscape, these changes could lead to positive spillovers, such as increased investment opportunities and technological advancements. However, it is essential to consider these shifts’ potential risks and challenges, including political instability and economic volatility.
The U.S. Economic Landscape and Canadian Business Impacts
With the new U.S. administration, their strategy seems to involve overwhelming the media, making it difficult for people to keep up and allowing them to implement policies with less scrutiny. For instance, tariffs are being imposed and lifted unpredictably, impacting blue-collar industries and businesses reliant on manufacturing and trade. Many Canadian companies might pause or reduce spending on growth and expansion until there is more clarity on the economic outlook.
Recent reports indicate that the Bank of Canada may lower interest rates further to counteract these effects, which could weaken the Canadian dollar and create new export opportunities. However, this uncertainty is causing significant concern among businesses and investors, who are wary of making long-term commitments in such a volatile environment.
Eli Lilly and Apple Commit to Major U.S. Manufacturing Investments
In a significant move influenced by tariff threats and policies promoting domestic production, Eli Lilly and Apple have announced substantial investments in U.S. manufacturing.
Eli Lilly plans to invest $27 billion in new manufacturing sites across the United States. This investment aims to meet the growing demand for its weight loss and diabetes medications while reducing reliance on foreign supply chains.
Apple has committed to a historic $500 billion investment in U.S. facilities over the next four years. This includes establishing a new AI server manufacturing plant in Houston, Texas. Apple’s decision aligns with the broader push for reshoring manufacturing and mitigating tariff pressures.
These investments highlight the ongoing shift toward strengthening domestic production capabilities and ensuring a more resilient supply chain.
The Biggest Risk?
Geopolitical instability remains the most significant risk, especially if G7 countries become involved in conflicts. However, history has shown that wealth is created through innovation and strategic investing, even during war.
Let’s Review Your Financial Plan
Markets shift, but the fundamentals of financial security remain the same. Let’s schedule a chat to discuss your investment strategy, review your insurance coverage, or explore market opportunities.
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