OK, the headline could be accused of being an oxymoron. The future is always uncertain. This age is just like the last age, and the age before that. There’s always “stuff” to be worried about. That said, you can’t blame Canadians, Mexicans, Panamanians and Greenlanders for thinking that 2025 brings a certain level of risk and uncertainty. We’re on the list of takeover targets for the U.S.A. President Trump has clearly stated that he is out to destroy Canada, economically. Military action of off the table, for now. In defense, Canadians are busy buying made in Mexico cauliflower and going on Saturday Night Live sporting ‘Canada is not for sale’ T-shirts. On the Sunday Reads we’re managing risk in the age of uncertaintly.
In the last Sunday Reads of 2024 I offered – Hello 2025, investing in the zero visibility age.
I suggested …
Trump economic ‘policy’ will likely shape the year. There’s just no tellin’ what will happen.
So I’m either an economic genius or Captain Obvious. I’ll let you decide 😉
Didn’t see the chainsaw coming
I also added that proposed Trump tax cuts and looser regulations will battle with inflationary tariffs and deportations. Add in crippling U.S. debts and deficits. What I did not guess is that Elon Musk would take a chainsaw to U.S. federal agencies.
Who had that photo on their 2025 bingo card?
So far in 2025 the U.S. on-again off-again tariff war is stealing the show. U.S. stock markets have given this 1970’s inspired disaster movie the thumbs down …
The S&P 500 is down 4.8% over the last month, and down 1.5% in 2025. The growth-oriented Nasdaq 100 is down 7% over the last month and 3.6% in 2025. The Nas is in correction territory (down over 10% from recent peak). But it’s early days, they are still rolling the opening cast and credits on this MAGA production. I’m not even sure if any tariffs have been applied to Canada yet. Just a lot of school yard bullying so far.
Cue the balanced portfolio
From that Hello 2025 post …
As always, an internationally diversified portfolio of low-cost index funds, with 60 per cent stocks and 40 per cent bonds, remains a smart choice. No, a 60-40 portfolio won’t shoot the lights out. But at least it means you don’t have to forecast. And there is a lot to be said for that.
I had suggested some gold as well. Gold makes the balanced portfolio better.
We can look to the Canadian asset allocation ETFs for balanced portfolios.
iShares XBAL is up 1.6% in 2025. Gold is up about 12% in 2025 with gold stocks (XGD-T) up over 20%. If you had a 10% weighting to gold you could have boosted your returns by 1% or more.
Also, check out the core ETF portfolios on Cut The Crap Investing.
Your balanced portfolio is heading in the right direction while U.S. stocks head south towards the Gulf of America 😉
Defensive stocks in a supporting role
Readers of this blog know that I’m a big fan of pairing defensive equities with bonds and cash and gold. Defensive equities can be found in consumer staples, healthcare and utilities. From last week …
Playing defense with Canadian utility ETFs.
You can also look to low volatility ETFs such as BMO’s Low Volatility ZLB-T for a more defensive demeanour.
On Twitter / X I offered …
The supporting actors that I’ve put on the table for readers are working. I’m a big fan of iShares U.S. Quality Dividend ETF (XDU-T). I’ve suggest the U.S. Dollar SCHD for readers who are looking to layer in a more conservative ETF that avoids the over valuation issue of the U.S. market. Nice to see that zigging while the U.S. market is zagging.
Let’s not forget the lost decade for U.S. stocks.
Stocks auditioning for supporting roles
I took a peek at the defensive stocks that we hold in our U.S. stock portfolio.
I am more than pleasently surprised. Here’s the list, run on testfolio.
What about bonds?
Bonds are doing their thing in quiet fashion. The Canadian bond market is up 0.7% in 2025, while U.S. bonds are up 1.5%.
Bonds, gold, defensive stocks. The defensive line is showing up in 2025 as a Trump tariff hedge. And international diversification is gaining strength. International stocks are greatly outperforming in 2025. Is this signalling the end of U.S. exceptionalism? Or perhaps the U.S. and Europe will share the stage? Stay tuned.
Recap: the global balanced portfolio is doing its thing. Gold and defensive equities continue to make a balanced portfolio much better.
Of course, the above is not advice but ideas for consideration. Also know your tolerance for risk and consider all tax implications.
The Sunday Reads
Dividend Hawk enjoyed some dividends from JNJ, ENB, FTS-T, CU-T and more this past week. In Hawk’s week in review you’ll also find some earnings summaries. Included in the mix is Canadian energy staple Canadian Natural Resources (CNQ-T).
Canadian Natural Resources Limited (CNQ) Announces 2024 Fourth Quarter and Year End Results; CNQ reported quarterly adjusted EPS of C$0.93, lower than C$1.17 from the same period last year and in line with analyst expectations. Revenue for the quarter ended Dec. 31 was CA$9.47 billion, compared with CA$9.55 billion a year earlier, while analysts expected CA$9.46 billion. CNQ achieved record quarterly average production of 1,470,428 BOE/d in Q4/24, consisting of record liquids production of 1,090,002 bbl/d and record natural gas production of 2,283 Mmcf/d.
Production is up but earnings are down as oil prices continue to fall. As I’ve observed over the last two years the world is awash in oil and gas. That said, I think exposure to the sector is important as an inflation and energy-shock hedge. I like the Canadian Big 4 for greater returns and portfolio stability.
CNQ-T, SU-T, IMO-T and TOU-T.
I will continue to chip away at these names. But we have to be prepared for volatility and perhaps long periods of muted returns or losses.
At Banker on Wheels you’ll find the comprehensive 2025 UBS global investment returns playbook. A podcast reveals that all of the financial advice that you need can fit on a single index card. Plus, the Rational Walk takes a look at the recent Berkshire Hathaway annual report.
We’ll keep adding to Berkshire. It is over 40% of my wife’s spousal RRSP.
Findependence Hub shows how pursuing finanicial independence has a positive impact on stress levels.
Dan at stocktrades.ca looks at his top 10 favourite Canadian large caps. That’s a good list to build around.
Check out the Canadian Wide Moat Portfolio.
Tawcan looks at the common mistakes made with the TFSA account.
How to use the TFSA account
At Moneysense you’ll find a good recap on Canadian bank earnings.
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In this bizarro world our four Canadian communications stocks are up this past month (BCE, T, QBR and CGO), and the least likely in consumer discretionary (CSW.a). When we have the cash once a month in retirement I’m always happy to acquire more shares in dividend paying Canadian companies especially at times when other investors are selling. I feel lucky we’re able to do this.
Yes, I have been suggesting for a few weeks that the bottom might be in for Canadian telco, but who knows.
That is awesome that you have more than need with respect to retirement funding and the portfolio. Keep tax efficiency in mind when you purchase. It’s important to know that when you’re using stocks to create retirement income, there is no difference between a share sale (homemade dividend) and a ‘real’ dividend. There’s no risk benefit with a dividend.
Given that, you can go with what is more tax efficient.
Dale
And you can go with what is the superior investment, irregardless of any dividend payment or payment level.
Dale
Hi Dale,
So the intelligent experts say, and I’m not going to argue. I wasn’t good enough for university and I’m mathematically challenged, but I’ve learned a few things in the last forty plus years of investing and no. 1 is to invest in a way that works for you. The first twenty years was as a self taught apprentice, learning from books, financial magazines (most of it long before the internet was around). Trying a little of this and a little of that. The bull market of the late 90’s allowed us to buy our bungalow after I sold out our stocks in the non-registered. Just pure dumb luck, not skill, nor market timing. Still live in that same house.
After the mortgage was paid off in 2003 I started investing in Canadian dividend stocks in the taxable account. The first year it was only a three digit $ income and then a few years later it was four and in the last few years it’s up to five figures in income from dividends alone, while at the same time outperforming year by year inflation. With the Canadian dividend tax credit, if there is supposed to be tax pain from our income, we’re not feeling it. I always say to people it’s all in that little book from a century ago, “The Richest Man In Babylon”. I reread it at least once a year to refresh my memory.
By the way, people are always saying how great the U.S. stock market is, and yes they’ve been for the last fifteen years. Go back further though to 1999 the inception year for TD e-Series and the Canadian market outperformed both NASDAQ and the equivalent of the S&P 500. The DJIA did outperform the Canadian stock market, but not by much. I’m assuming that the BTSX also outperformed the Canadian index but I don’t have the return figures. As Geraldine Weiss said a few decades ago, “dividends don’t lie”.
Thanks. Of course U.S. stocks have just trounced the Canadian market over the last 20 years, with much less risk. I often share, what is the cost of your Canadian home bias …
https://cutthecrapinvesting.com/2021/10/30/what-is-the-cost-of-your-canadian-home-bias/
And now the real concentration risk is showing itself, with Trump out to economically destroy Canada. What if he is successful in that regard.
To each his or her own for sure, but I have to put forth the proper information on this blog. A severe concentration risk in Canada has led to terrific underperformance, greater risk, and is a very poor investment idea 🙂
Dale
Hey Dale, if a retiree has something like 100 per cent XBAL in a registered account and wanted to add some of the
defensive sectors you mention, what percentage of the overall investment might make sense? For example, sell 25 per cent and equally allocate proceeds to consumer staple, health and utilities index etfs? Would the overall risk profile be more or less conservative?
Hi Botan, yes if history repeats adding those sectors would lower risk. That said, the risks are well maintained with a balanced model such as XBAL. I prefer shading to defensive sectors.
That is a personal choice.
Thanks for stopping by.
Dale