On Twitter I was asked what the heck is going on. “I don’t get it” offered a follower and blog reader. The Canadian economy is entering a rough patch, things are supposed to get much worse, and Canadian stocks are surging higher. In fact, the TSX Composite just reached an all-time high. More proof, that no one knows what is going to happen. We can’t time the market or sitting Presidents.
Around Tuesday April 8, President Trump began to walk away from his nonsensical tariff war blabbering, just as I had predicted on March 20th.
My take on the global tariff war concept was and is …
The bad news is a global tariff war spells economic destruction.
The good news is a global tariff war spells economic destruction. Essentially, it can’t happen, I think and hope. The markets will push back …
The markets pushed back on Trump’s plans, Trump listened, and then stocks moved on to higher prices.
And remember, the stock market is not the economy. And nearly 50% of TSX companies’ revenues originate outside of Canada.
What sectors are driving the TSX Composite?
From April 8, the TSX Composite is up 19%. We know that financials and energy and resources drive Canadian stock markets so let’s have a look there first.
Sure enough, during that period the financials XFN-T are up 28%. The banks ZEB-T are up 16%. The insurers that are within the financials indes have helped to drive returns well above that of the banking index. Diversifed financial Brookfield is up 36%. Fairfax Financial (Canada’s Berkshire Hathaway) is up over 44% over that last year and an incredible 540% over the last 5 years, not including the modest dividend.
So ya, the financials are humming. As I wrote in investing in Canadian banks, the banks are a proxy for the Canadian economy. But they are much more as well with considerable earnings in the U.S. and in other economies and regions. Same for the insurers who are very international.
I’m more than happy to hold this ETF in my personal RRSP. My wife holds most of the indivdual stocks in her RRSP.
Canadian energy stocks
Let’s move on to energy and other resources. In October of 2020 I suggested that readers consider Canadian oil and gas stocks. The timing was fortunate as the sector went on an incredible run, up over 400% at the peak. The sector did some heavy lifting along the way.
But the sector has cooled and is down some 7.3% over the last year. The returns are also negative from April 8.
That said, the Canadian pipelines have been carrying the energy sector. Enbridge ENB-T and TC Energy TRP-T are leading constituents in the Canadian TSX Composite and they have greatly outperformed over the last year. They’ve made a minor contribution.
TC Energy is up about 35% over the last year while Enbridge is up in the area of 30%. Enbridge is the forth largest holding in the TSX while TC Energy is top 15.
The materials sector XMA-T helped to lift the TSX over the last year, up 26% at its peak a week ago. Gold stocks drove the index. Gold was and is the perfect hedge for Trump’s unpredictability and potential inflation-inducing tariff strategy. Materials did some lifting along the way.
Defensive equities rise to the occasion
Consumer staples XST-T have outperformed over the last year. They have been a wonderful defensive holding. They shone during the worst of the Trump fears. That said, they (unfortunately) have a very small weigting in the TSX.
Utilities XUT-T have kept pace with the markets over the last year and have offered recent support, as the sector is near all time highs. More on this below when we discuss retirement and managing risk with defensive equities.
Canadian tech rocks
One of the main drivers to the new highs is the tech XIT-T sector. It’s up over 41% over the last year. Shopify is up 95% over the last year. Constellation Software is up 37.5% over one year. Shopify has the second largest weighting in the TSX. It will often trade places with RBC for top spot.
From April 8, XIT is up 26%, largely driven by Shopify.
Here’s the lift from Financials and Tech from 2023 …
Industrials ZIN-T are up 8.8% over the last year. They’ve had litte effect, bringing down the TSX slightly.
Reasonable value and growth
The S&P/TSX Composite Index is trading at about 14.5 times estimated earnings for the next year, only modestly above the long-term average of 14 times. Meanwhile, this past earnings season saw earnings per share growth of about 22 per cent in Canada and 12 per cent for the U.S. The market likes the valuation story.
Another lesson in market timing
You can’t time the market, it’s impossible. You’d think it would have been a no-brainer to hold back money to invest in Canadian stocks at even lower prices as President Trump promised to destroy Canada economically. The U.S. could, and they might, but that hasn’t played out. The equity markets are guessing that won’t happen.
In April (the trading low would come two days later) I suggested that accumulators should …
Enjoy those lower stock prices, honestly.
From that post …
Volatility has returned in a big way. With volatility comes lower stock prices, and that can be good news if you know how to harness your emotions. Lower stock prices can help you build incredible wealth. But learning how to stay the course through market corrections and bear markets is essential.
The phrase or mantra that I have repeated on this blog (over and over again) is …
Get an investment plan and stick to it like glue.
From a March post …
And sure, the prices could have gone lower, and that would have been even better for accumulators with a long term time horizon. But prices started to move back up, quickly erasing the correction. Even U.S. stocks are now within 3% of their all-time high.
International equities
International stocks have made an all-time high.
It’s no suprise that a core global portfolio is also at all-time highs.
Be sure to check out the asset allocation ETF page for the performance and comparisons of the wonderful Canadian asset allocation ETFs.
Retirees are always prepared
In retirement, we should always be prepared for market distress. And we’re prepared well in advance as we don’t know when corrections will happen and for how long they will last. We set our asset allocation level to match our financial plan and our risk tolerance. If we do this correctly, we should essentially breeze through the market turmoil.
Here’s the boost of defensive equites during a period of market distress …
At Retirement Club, putting defensive equities to work is a key theme. They work on the defensive line along with bonds, cash and gold. We look to the retirement cash flow calculators to help us discover an ‘optimal’ spending plan, drawing from registered and non registered accounts, pensions, CPP and OAS and other sources. You can use Contact Dale if you’d like to get on the list for the 2026 group. Or, if you’d like more info.
What’s next? Don’t know.
We don’t know the future. Trump could continue to walk away from Tariff wars, or he could ramp things up. The markets might move higher, they could move lower. Other risks could materialize. Other tailwinds could arrive. Who knows?
For now, enjoy the portfolio success and rebalance your portfolio to plan. Stick to that plan.
More Sunday Reads
Findependence Hub takes us to BMO’s DIY Investor Day.
Also at the Hub, how much should retirees with RRIFs de-risk their portfolios? That takes you to the MoneySense article where I offer up a few ideas.
At Stocktrades, Dan looks at income on autopilot. I don’t favour an income approach, but here ya go. I certainly know that Canadian investors like their dividends and income. For many it can help manage emotional risk …
Dividend Hawk’s week in review includes a look at PowerCorp, an XFN constituent …
Power Corporation of Canada (TSE:POW) Reports First Quarter 2025 Financial Results; POW reported quarterly adjusted earnings of C$1.22 per share for the quarter ended March, higher than the same quarter last year, when the company reported EPS of C$1.09. The mean expectation of analysts for the quarter was for earnings of C$1.27 per share. Adjusted net asset value per share was $68.99 at March 31, 2025, compared with $60.44 at December 31, 2024. Book value per share was $36.10 at March 31, 2025, compared with $35.56 at December 31, 2024.
And …
Cisco Systems, Inc. (CSCO) Reports Third Quarter Earnings; CSCO reported third-quarter non-GAAP EPS of $0.96, representing a 9% year-over-year increase and beating analyst expectations by $0.04. Revenue for the quarter totaled $14.15 billion, surpassing estimates by $90 million and growing 11.4% compared to the same period last year. For fiscal year 2025, management is guiding for revenue between $56.5 billion and $56.7 billion, and non-GAAP EPS in the range of $3.77 to $3.79.
Banker on Wheels weekly offering turns to building a diviersifed portfolio from Morningstar.
Also – the top stock markets from 2015 from Visual Capitalist. The U.S. leads the way, while the TSX puts in a reasonable 7.2% average annual.
Here’s part two of Bob at Tawcan’s trip to Taiwan
From A Wealth of Common Sense a look at U.S. 60/40 balanced portfolios from WWII. Here’s the stocks …
Here’s the 60/40 draw down. Yes, bonds almost always do their thing.
Related Read: Why retirees hold bonds, cash and GICs.
At Early Retirement Now – is this the end of FIRE?
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That cash went into my TFSA account to help buy some CBIL-T and HUTS.T.
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