En avant : Au-delà des tarifs douaniers – où trouver des occasions de placement et éviter les pièges en 2025

[00:00:21] Emily Anonuevo: Hello, and welcome to The Upside. I'm Emily Anonuevo. President Trump has delivered on his tariff threats and officially enacted tariffs on Canada that began March 4th. Canada has retaliated with its own levies against American goods. As the tariff story continues to unfold what does this all mean for Canadians, for investors, for our economy overall? What can investors do to brace themselves for what seems to be a bumpy road ahead and perhaps look beyond the tariff headlines? Today, you'll hear insights from Fidelity portfolio managers and experts who have been following the trade war story closely. First, I'm joined in studio with Fidelity portfolio manager, David Tulk, who's here to unpack the financial and economical impact of these tariffs. David is part of the Global Asset Allocation Team which manages several multi-asset funds on behalf of investors. David, welcome.

[00:01:12] David Tulk: Thank you, it's great to be here.

[00:01:13] Emily Anonuevo: Thanks for being here. I know it's a busy time so really appreciate you sitting down and providing some of your insights. Now, tariffs are here, they're here and as far as we know they will continue. It has affected the markets. Our Canadian dollar has been hit. David, if you could just take a step back and explain to our viewers on a high level what these tariffs mean exactly and what significant changes will we see immediately.

[00:01:39] David Tulk: You are right, we are in a tariff war. I think what that means for the average Canadian is, unfortunately, an increase in economic insecurity. That also translates to a fair bit of financial market volatility. It's very headline-dependent right now and those headlines are coming fast and furious. Ultimately, I think at the end of the day if these tariffs are to remain in place for any extended period of time it could have a lasting and pretty significant impact on Canada's economy. Fortunately, this is not happening in a vacuum and I do expect that governments, as well as the Bank of Canada, will respond to try to provide some support to lessen the blow for Canadians.

[00:02:17] Emily Anonuevo: A lot to unpack there. Let's dig a little bit deeper. Tariffs are essentially a tax on the consumer, if you can just expand on how these tariffs will affect the Canadian consumer and on the flip side, the US consumer.

[00:02:32] David Tulk: You're right, it is ultimately a tax on consumers and it's delivered through importers. That's really where the tax first hits. Let's just use the example of a US importer. Everything that they're importing from Canada right now is going to be subject to a 25% tax or a tariff. The auto industry actually just had a quick headline that they may be exempted from this but as it stands a 25% excluding energy which is that 10%. Basically, at the end of the day these importers need to face this higher cost for what they're taking in from Canada. They have a couple of options. First, they can decide to absorb that higher cost into margins, or they can pass on that higher cost to the end consumer.

[00:03:15] Now, this is where the end consumer has to make a decision. The price is higher, they can maybe consume less of it or they might find an alternative product to purchase instead. That's really where the hit is back to Canada. It's less demand for Canadian exporters. That really bubbles up to the wider economy and potentially even Canada's labour market. This is especially relevant for companies that are in the manufacturing industry or in other industries that are really directed towards international trade because they're going to see their demand decrease and that's an alarming concern. That's the first piece of economic uncertainty. The Canadian consumer, what they're going to have to face now, as it stands at least it's a fairly narrow application of retaliatory tariffs. Things like orange juice, coffee, clothing, even motorcycles, those are the ones that are subjected to the higher tariff. Anyone as a Canadian who's importing from the US any of these products they're going to pay that higher price as well. Those are economic linkages and consequences. Unfortunately, it's an unhealthy combination of weaker economic growth and higher prices.

[00:04:23] The financial market implications, again, very much driven by volatility. That volatility comes down to the notion that the bond market, the stock market, even the currency market, they're trying to figure out how this story is going to evolve from here. They need to figure out whether these tariffs remain in place for a long time, whether they're broadened or whether there's carveouts, what type of retaliation is likely, and also what kinds of support governments and central banks might provide to their respective economies. To be perfectly honest, nobody has any idea what's going to happen next. The result is just more volatility headline to headline and us, being investors, need to manage that uncertainty and manage that volatility. That's what we're working on today.

[00:05:06] Emily Anonuevo: It's such a fluid situation and we know that anything can change in a matter of days, a matter of weeks. What I'm hearing is the key thing is duration. If it lasts two weeks, may not be a significant impact. If it lasts two months, could be. You're hearing negative headlines, recession, job losses, how can investors brace themselves for these changes in uncertain times ahead?

[00:05:36] David Tulk:  I think the most important part when managing the volatility is to really stick to a medium term plan. Trying to have a longer-term investment objective, to stay in the market, not be overwhelmed by the headlines, that is really the key. A big part of that, which is really an important part of our job as portfolio managers, is to take the emotion out of it. It is a very emotionally raw issue. I think we all feel it. When it does come to the investment decisions you have to make you need to how to figure out what the medium term outcome is going to be, try to invest around that, stay diversified, and not be overwhelmed by a lot of the volatility, which, admittedly, is a very difficult thing to try to do on a practical basis.

[00:06:17] Now, when it comes to some of the investment decisions that we've made and the funds that we manage, one of the positions that we had, one of views that we had even prior to this tariff risk, was a fair bit of concern around Canada's economic outlook. That concern really centered on a lack of business productivity that we've experienced for quite a number of years. Also, the challenges through the mortgage market and consumer debt more generally, all of these were at least giving us the indication that Canada would likely underperform economically. That concern, at least in a positioning perspective, was reflected in a deliberate choice to be underweight Canadian assets for a preference to be invested in other markets around the world. Now, you layer on top of that the tariff risk and tariffs, unfortunately, will disproportionately hurt a country like Canada because we do depend on trade so much. As a result, the underweight we have to Canada is an appropriate position to be maintained in light of these tariffs.

[00:07:17] The next part of the decision that we need to make is really how much risk we also take in terms of our portfolio. How do we decide between stocks and bonds? For most of last year we were comfortable having a larger allocation to stocks but as the uncertainty has built over this year we've been slowly paring a little bit of that back. We still want to be mindful of how much risk we're taking in our funds but, ultimately, I think it's prudent, given the uncertainty, to have a little bit less in the way of an equity market exposure relative to bonds.

[00:07:47] Emily Anonuevo: Really fascinating there, the GAA's medium to long term outlook you just laid out there. Now, David, as a former member of the Bank of Canada let's touch upon what the BoC may do in next week's rate announcement. What do you think their next move will be?

[00:08:04] David Tulk: I think the Bank of Canada is also very much watching this tariff issue. They have no more insight than any of us do when it comes to trying to understand it. When you go back to their last meeting, this was really when the tariff issue was more of a risk as opposed to a reality, the Bank of Canada said, absent the introduction of tariffs we're probably done cutting interest rates. Now that we have this tariff risk it seems that the Bank of Canada may feel compelled to lean into that shock to further cut interest rates. I wouldn't be surprised if that were to happen. It's not a guarantee by any stretch. Especially if these tariffs were to remain in place over an extended period I would have a fair bit of confidence that the Bank of Canada will continue to cut interest rates. Really what they're trying to do is to provide any kind of positive economic activity to offset the hit from tariffs. Some of that comes through the currency. As the Federal Reserve in the United States continues to hold interest rates unchanged and the Bank of Canada continues to cut interest rates that interest rate differential will probably put more downwards pressure on the Canadian dollar. That's an important adjustment mechanism because if you go back to that US importer, if they're facing the higher cost of the tariff they can be partially offset by the fact that Canadian exports are cheaper because the currency is lower and that's helping mitigate the shock. I think that's what the Bank of Canada's playbook will look like not only next week but into the rest of this year.

[00:09:29] Emily Anonuevo: Really interesting. You thought they were sort of done and inflation was cooling a bit and then tariffs swooped in and now might need to be a new plan for the Bank of Canada. David, you've been at Fidelity for quite some time. Fidelity has gone through volatile times before. Can you explain how the team is set up to withstand this type of turbulence and volatility in the markets?

[00:09:57] David Tulk: I think in periods of uncertainty and market volatility it's absolutely important to get as much information as you possibly can. We're really fortunate at Fidelity to have a huge pool of researchers to draw from to help us make our investment decisions. That includes top-down analysts like economists and political strategists, we have boots on the ground in Washington trying to talk to as many policymakers as possible. They're helping us understand a lot of the macro developments that we're all navigating through. Another really important source of intelligence for us is from our building block portfolio managers and all of the analysts that support them. What they're doing is they're out there meeting with companies. Now, companies are trying to make decisions in real time, they're facing the same headlines as we all are and they're actually making decisions that will impact the economy. Drawing in as much of those insights into our investment process gives us, I think, the best chance at protecting the funds but also understanding where opportunities will emerge. It's really just leveraging the research that we have to make investment decisions.

[00:10:56] Emily Anonuevo: Lastly, David, a message to investors as we sort of navigate and go forward through these stormy waters. Why is it so important to stay the course during these difficult times?

[00:11:08] David Tulk: I think trying to time the market is exceptionally difficult. As we've seen with a lot of the volatility what you think might happen can be entirely unwound an hour later, 10 minutes later. It's really important in these environments to try and focus on the medium term, again. That starts with really taking the emotion out of the investment decision. If you've got a view that is a medium term plan, stick to that plan. An important part of that also is to be diversified. We really don't know exactly how things are going to unfold but if you have a large number of exposures spread across a number of asset classes that gives you best chance at weathering the most likely set of outcomes. At the end of the day I think as we've seen with prior financial crises and prior periods of market volatility this passes eventually. Staying in the market with a focus on the medium term I think is the best strategy that someone can take.

[00:12:02] Emily Anonuevo: Stay in the market, stay diversified and, of course, connect with your financial advisor with all your investment decisions. David, thank you so much for taking some time, sitting down with me and providing your insights for our investors. Really appreciate it.

[00:12:15] David Tulk: It's my pleasure. Thank you.

[00:12:17] Emily Anonuevo: Up next, we caught up with Fidelity Canada Chief Investment Officer and portfolio manager, Andrew Marchese, on Tuesday just as the tariffs took effect. Here's what Andrew had to share about what we can expect in the days to come and why it's so important to stay diversified now more than ever.

[00:12:33] Andrew Marchese: Good day, everyone. Trade tariffs between the United States and longstanding trade partners, Mexico, Canada, China, are gripping global stock markets. The markets are fraught with uncertainty at this point in time. We've now ventured down a road that many people thought we would not be venturing down when we started this calendar year. I think the implications are quite vast and the spectrum of outcomes are also very diverse. For investors I think there's a number of things that one has to keep in mind as we sit here today. One, while we know the amount of the tariffs and the industries, sectors, goods, and services that are implicated today one really has to ask ourselves about duration and how long these tariffs between these countries stay in place.

[00:13:23] That is quite unknown at this time and there will be a lot of changes as time transpires. It is important as investors that we don't react to what we see initially in headlines but rather apply a much more thought out and deliberate approach. As always, we have to keep corporate profits at the forefront of our investment decisions and track those where they will go, not just over a short period of time but over a mid to a long range period of time. The other thing that we have to consider a lot is monetary response by central banks. If, indeed, these tariffs last for a prolonged period of time one can expect slowing of all the economies in all the countries that are implicated. That will not be a static event.

[00:14:12] We could expect global central banks to react in kind by cutting rates to hopefully stimulate economies. Moreover, different industries and sectors are not equally implicated. For example, the United States has made mention about NATO allies pulling their weight, so to speak, in terms of defence spending. We must ask ourselves, do various NATO allies increase spending on defence and what are the implications for companies in those respective industries? While trade is affecting, possibly a negative sense many industries and sectors it may have some actually positive benefits for other industries and sectors.

[00:14:57] The other thing that we have to consider is the market generally, historically, can react well to good news. It can actually also react favourably to bad news. What it generally doesn't react well to is uncertainty. At this point in time we are speaking to our companies, and I think various industries are still trying to put their heads around about what are the implications for their businesses going forward. As time unveils itself we can expect there to be a little bit more clarity with respect to the companies in the affected industries and they may have a better outlook and a better message for investors going forward. In the interim, as we entered this year stock market valuations, particularly in the United States, were relatively high and we could expect some multiple compression in that standpoint. Also, we saw other countries' stock market multiples somewhat compressed. It would not be surprising to see a rotation of flows from the US-dominated centre of the market to other countries who may not have large sectoral implications and whose valuations could actually expand from this point.

[00:16:11] The last factor we have to consider that goes hand in hand with growth, it also goes hand in hand with monetary response, is the currency implications globally. For us sitting here in Canada continued downward pressure on the Canadian dollar is a distinct possibility if the Bank of Canada continues to react by cutting rates going forward. They have already led the US in this respect cutting rates more so than the US in 2024. If economic growth slows considerably one could expect that the Bank of Canada would react in kind. Those are the implications that we are thinking about today.

[00:16:55] Obviously, there's more questions than answers but I think the four points that I've outlined for you actually form the foundation of where to look for answers. As always, keep long term investment goals in mind, keep diversification as your forefront and try not to react to the headline news that we see before us today, but rather setting out an investment goal and directive for the medium to long term.

[00:17:24] Emily Anonuevo: Canada's position as America's largest energy trading partner now holds a lot of uncertainty as tariffs on Canada move forward. Many sectors will feel the trickle-down effects. Earlier Wednesday, I sat down with equity research analysts, Jin Hwang and Payton Liske, who shared their insights on how energy and industrials will be affected by the Trump tariffs. Jin, Payton, thank you so much for being here. Let's get straight to it. Jin, I'll start with you. Tariffs are here and we know that Canadian energy is going to be hit with a 10% levy, 10% tax on a high level. If you can take a step back and just explain to our viewers what this all means for the energy sector. You cover US energy, what does this mean for the sector?

[00:18:08] Jin Hwang: It's, obviously, still very fluid at this point but assuming that energy is hit with a 10% tariff I would say the overwhelming sentiment so far has actually kind of been business as usual. That's really underpinned by two things. The first is while the overall tariff might be 10% there's still a big question of how much is going to be borne by the Canadian producer, the US refiner and the US consumer. It's still big debate with that piece. If you look at what the commodity markets are telling you right now there's actually more people betting that most of the costs will be borne south of the border as opposed to by the Canadian producers themselves. That's the first piece.

[00:18:42] The second is it's important to remember that oil is a global commodity and that even Canadian producers are paid in US dollars. While there might be a 10% tariff on a barrel of Canadian oil that should be mostly, if not fully, offset by the stronger US dollar that these producers would receive should tariffs go into full effect. In aggregate it's not great for the sector as a whole but the simple math would tell you that cash flow for these businesses should be fairly well preserved even in kind of a 10% tariff situation.

[00:19:11] Emily Anonuevo: Interesting. Still a lot of unknowns, like you said. Jin, if tariffs do stick can you give us a sense of what the medium and long term outlook is?

[00:19:23] Jin Hwang: While there's a ton of uncertainty in the short term around commodity prices whether it's in Canada or globally I would say the long term outlook for Canadian energy is probably the best it's been in decades. Canada has the third most oil reserves in the world and we just have not been able to take advantage of that because we haven't had the pipe capacity to take our products into international markets. I'm sure you've seen the headlines over the last couple of months but with the startup of the TMX pipeline last year and LNG Canada coming online at some point this year we now have that much needed outlet to take our products into international markets which means [indecipherable] growth is actually probably going to be better than it's been in the last 10 years. Obviously, fantastic for producers in Western Canada, it's our job right now to understand who is going to benefit the most from this growth over the next 5, 10 years without having to take that strict view on commodity price.

[00:20:09] Emily Anonuevo: Really interesting point about pipelines there because in previous years a lot of roadblocks, a lot of obstacles. This may shift things. I'm going to come back to you, Jin, but I want to switch gears to Payton. Payton, you cover in your research sector industrials, transportation, aerospace, defence, your initial thoughts on how these tariffs will affect that sector that you research.

[00:20:32] Payton Liske: I think what investors are struggling with right now is how will these tariffs be enforced and what is the duration. I was just reading a headline before we came into the studio here and it looks like autos might get a one-month carveout. Things are just changing every day. There's a wide range of scenarios and outcomes that we're running through and modeling. I think the initial reaction has been this has been negative for transports, which I cover, as volumes seem to have softened a little bit. It's created a lot of uncertainty. Project, large CapEx decisions have been kind of deferred or delayed until we understand what the rules of engagement look like. It's softened volumes. The new order PMI softened, is now in contractionary territory. We've seen some headwinds to, and I think there will be some volume headwind to, rails and to other areas within transports. I think there's also some medium to longer term opportunities that we're looking through and we want to try to capitalize on, which I can speak about.

[00:21:31] Emily Anonuevo: If you can expand on that. A lot of sort of negative news right now but are there pockets of opportunities? Are there hidden gems maybe in the industrials, transportation sector that people may be overlooking right now?

[00:21:46] Payton Liske: I think there's a couple areas. I think if we step back and think about what Trump is trying to do here, he wants to bring more US domestic manufacturing activity back to the US. I think there's pockets within transportation that will benefit and will leverage increased volumes. We're looking for those areas that we think have real pricing power and also idiosyncratic opportunities to maybe improve margin along with that volume. There's also some other areas within commercial aerospace which, to be honest, I've gone back and looked through the last escalation of Trump tariffs in his previous campaign and there was really no impact to these guys. They have really strong businesses, high recurring revenues, real pricing power. I think that there's a lot of idiosyncratic opportunity within that space as well.

[00:22:31] Emily Anonuevo: Interesting. Same question to you, Jin. Do you think now that the tariffs are here there may be a shift in sentiment, there may a shift in the way Canada, obviously, does business with US and other countries. What do you think?

[00:22:46] Jin Hwang: Regardless of what happens to tariffs I think this has been a refreshing wake-up call that Canada can't singularly rely on one trade partner going forward. How we look to solve that is going to be a massive question. I would argue that natural resources, for which Canada is extremely well endowed, is a phenomenal place to start. I think that's starting to get recognition across the country. I think the best proof point of that is when was the last time Quebec has been talking about building new pipelines. The sentiment shift, you're starting to see early signs of it and I think what this is ultimately going to mean is that while tariffs will be a short term headwind for the sector I think the long term trajectory that it puts us on, both as a sector and a country, is actually quite positive.

[00:23:25] Emily Anonuevo: Payton, last question to you. The analyst team, obviously involved in many meetings, in ongoing research as this situation changes and is very fluid, how is the team, how is Fidelity set up to handle this type of volatility?

[00:23:40] Payton Liske: I think the team has done a really good job. We've been working on this for quite some time and have been running scenarios. We've been very close to our companies, that's one of our biggest advantages. In the last two or three weeks I've met with almost every one of the companies that I cover, and I know I'm not the only analyst that's done that. We have very good relationships with our companies. When we get into situations like this we try to get closer to them, better understand how they're thinking through the range of outcomes so that it can help inform our decisions. We have a very experienced team here. We have a lot of senior portfolio managers that have been around for two plus decades and, obviously, they help us quite a bit. We lean on them to help inform kind of the different range of outcomes that we should be thinking about. We just focus on bottoms-up fundamental research and try to, obviously, be macro aware but not let it sway or inform our bottoms-up fundamental research.

[00:24:30] Emily Anonuevo: Peyton Jin, super helpful, super fascinating to have you guys here just to provide your insights. It is really helpful at this uncertain time. Thank you so much for your time. Finally, we hear from long-time dividend investor, Don Newman. He explains how dividend investing could take centre stage at this point in time and where he's finding opportunities. This is just a small snippet from Don's interview on Fidelity Connects with host, Pamela Ritchie. You can catch the full 30-minute show on fidelity.ca or subscribe to the Fidelity Connects podcast for our replays and much more. Let's take a listen to Don Newman.

[00:25:06] Don Newman: In an uncertain world what I'm thinking about right now is if there's uncertainty out there let's maybe tilt a little bit more towards certainty while this goes on while keeping an eye on securities that have become probably unduly cheap and we have some big upside to come over the next couple of years.

[00:25:27] Pamela Ritchie: Really interesting. We'll get into that piece of it. Is there a premium that's willing to be spent on some safety, some defence, some stocks that would post [crosstalk]?

[00:25:36] Don Newman: Not necessarily defence but I think if you look at sort of the way I'm thinking about things now there's usually variability in outcomes for stocks. In times when you have increasing uncertainty in the market what I generally look at as a dividend manager and someone that's sort of focused on at least buying companies at reasonable prices is bringing in the variability of outcomes a little bit. Sometimes you can find things where you think there's going to be a really good upside, not too much downside but there's variability. The way I'm kind of thinking about things right now is there's a little more uncertainty in the market so tilt things to companies where maybe I think they grow 8%. If I'm wrong they actually grow 7% or 6%.

[00:26:30] What I'm trying to avoid right now are companies where the market thinks they're going to grow 20 and it turns out they're going to grow 2 and that's a really bad outcome for the stock. We'll look a little bit more for the certainty of earnings, the certainty of dividends and increasing of dividends, tilt the portfolio that way and then think about, okay, work with our analysts. Who's getting hurt off this but how low can the company go, or where's a really good sort of buying point for the company? If they hit that then say, okay, maybe we'll tilt back a little bit and we can ride out a little bit of the storm and then, hopefully, make a lot of money on the upside.

[00:27:12] This is going to be a great case for active management. This is what we're here for. This is why we show up to our job every day. This is why we have analysts that know the companies better than anyone out there. This is why having a good dividend fund that has a little more stability, hopefully, in it, that can generate a good yield, can add some relative stability at times but also go and find some upside when things get a little bit shaky. The shakiness means there's some opportunities for us to buy. So this is what Fidelity is, hopefully, set up to do. This is why we put so much resources into having really great analysts that do things, having portfolio managers that all work together and have been working together for a decade or two. This is, hopefully, what we're here for clients to do. I think makes a great case for dividend equities being sort of a core part of people's portfolio because they offer yield that's not going away, they offer some stability and they offer good appreciation over time.

[00:28:28] Emily Anonuevo: As the tariff story continues to unfold we will do our best to keep you informed about the ongoing changes in this trade environment. We hope you'll stick with Fidelity Canada for more insightful content but remember, working with a financial advisor is the best investment you can make. Thanks for watching The Upside. I'm Emily Anonuevo.