Canadians investing in the age of Trump

May 16, 2017


Canadians investing in the age of Trump


In my recent update to clients about performance, ‘Making Investing Great Again,’ I talked a bit about the Donald Trump effect on the markets.

Love him or hate him, the new US chief executive (and his tweets) form part of that bigger conversation.

Recently, Trump was putting the finishing touches on an executive order to sink the North American Free Trade Agreement (NAFTA). That may well have been been merely an opening bid for the author of The Art of the Deal, to create urgency. But still, a NAFTA renegotiation looks to be in the offing. No one quite knows what might happen.

Why is this important for Canadian investors? We need to remember that they aren’t just investing in Canadian companies, bonds and real estate. In seeking higher returns and a diversified portfolio, we access a global market, including the US.

The converse is also true.

What happens in the USA is very much tied to the Canadian economy.

And whether the US pulls out of NAFTA or not, with disputes shaping up over the dairy industry and softwood lumber, something is going on. Some Canadian investors are thinking that we’re in uncharted territory. They’re not entirely wrong.

But then, in the long term, it might not matter as much as they think it does. The hiccups of the daily news headlines may matter a lot less to your long-term investing strategy than you might think.

Canadian investors can protect their portfolios against adversity through diversification

In any investing environment, diversification is a well-known way to reduce risk. It goes back to the old saying, don’t put all of your eggs into one basket.

As I said in my Year in Review talk, investors who want to play it safe can look to the way that pension plans invest to get steady returns. Part of the reason they do so well over time is in their holdings of private equity. This helps mitigate volatility while protecting against inflation.

Our ETF portfolios take our lead from that kind of model, where some assets are not as susceptible to investor behavior.

Our strategy for thoughtful investment

We avoid emotional, knee-jerk reactions during downturns, which simply lock in losses. We’re rebalancing our holdings on a regular basis. We take a rigorous adherence to the simplest idea in investing: buy low, sell high.

It’s not a bad thing for investors to keep up with the daily headlines, whether it’s Trump or something else. But don’t let it ruin your day. When you’re investing for the long term, these big news events usually look a whole lot smaller in the rear-view mirror.

So stay calm. You can probably stop nervously checking your portfolio twice a day. And if you’d like, talk to one of our financial advisers about signing up for an ETF portfolio that keeps you diversified and ready for the future.

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