So don’t push me ’cause I’m close to the edge
I’m tryin’ not to lose my head
The markets have been so volatile, I now wear a neck brace. The markets declined then they snapped back. The truth is I did fracture my neck but not due to the markets but like the markets it wasn’t the fall but the snap back that broke my neck. I heard a line in a movie, it is not the fall that causes the damage, it is the sudden deceleration, that is, when you hit the ground. (the neck brace, like the market movements is only temporary)
” It’s like a jungle sometimes It makes me wonder” The Message by Grandmaster Flash
After spending months avoiding comments on tariffs, we finally capitulated and provided some details in our reflection section. We still have to say analyzing the market is difficult when you do not know when or where the random tariff wheel stops. Even as we were working on this commentary Canada cancelled the Digital Services Tax which was forecast to bring in $2 billion in tax revenue. That might explain why we still do not have a federal budget. It is like a jungle when you think that the US gave 90 countries 90 days to negotiate a trade agreement by July 9th. Given how often the tariff rates change in a few days this analysis may be as useful as buggy whip for your electric car. It does make me wonder.
It is getting a bit boring, but we have not changed our approach to the markets. We do consider world political events but focus on the long-term potential for the companies in which we invest. When looking at a stock we consider the total return. The total return captures the dividend and the capital return. Dividends provide a couple of advantages including when a client needs cash, they can just take the dividends and not trigger tax by selling a stock. In a similar vein, it helps when rebalancing a portfolio as the dividends can be invested in an area that is below the target level, again without having to trigger tax or commission expenses. Despite the whipsawing markets stocks like the Canadian banks still look attractive and offer the potential of higher dividends next year.
