Market Outlook - February 2025

It’s hard to put together a meaningful outlook at this time as there is so much uncertainty around tariffs and the impact they could have on individual businesses and the economy in general. There are so many moving parts, and while negotiations are still ongoing, tariffs could eventually be targeted using a rifle as opposed to a shotgun. Another layer of complexity could be that tariffs will be gradual, meaning they start out low and increase over time. Of course, the tariffs could also be squashed all together if certain requirements are met. What are those requirements? Perhaps, it takes proof the border is successful in stopping fentanyl 100% from crossing into the U.S. If that were the case the tariffs could be short lived. If it means Canada removes all existing tariffs on American goods, then this could be over with the stroke of a pen. The silver lining is this could force our leaders to get rid of any trade barriers between provinces and possibly introduce incentives to access new markets outside of North America. Perhaps, our leaders will finally agree on a pipeline East-to-West and maybe even build refineries. While they’re at it, how about the creation of a Sovereign Wealth Fund and harness the incredible wealth of our resources. Canada could be so much more. We need a leader with vision to make that happen, but we digress.

The point is we don’t know the outcome here. These things are out of our control, but what we do know is that before the tariffs were uttered, consumer confidence was high. Business leader confidence was high. Inflation and interest rates were going down and the stock markets were trading at all time highs. It is important to realize that at this point nothing has changed. There are cards on the table, but the deck needs to be shuffled a few times. It could very well be that after a bit of confusion and some unpleasant volatility in the first half, we could be right back to business as usual in the second half. It's likely the markets remain range bound for the duration of the year. Call it a consolidation pattern after two solid years of surplus returns. Our expectation for North American equity markets in 2025 remains a modest 10% total return. We admit we’d be thrilled with 7% and in the case of a mild recession, it’s still possible to have positive equity returns and at the very least the portfolio is kicking out solid dividend cashflow.

If you would like to receive a full copy of our February 2025 market commentary, please email us at msbwealth@nbpcd.com