North American Equities: Insights on Navigating Volatility and Global Politics

Transcript

Everyone, it is March 3rd, 2025. Peter Hofstra here with an update on North American equities. Well, we thought some volatility might show up given the nature of the Trump administration and that part has certainly not disappointed. If anyone happened to catch the Oval Office when the press was there, it seemed like any, whatever, behavioral codes, any sort of global etiquette that might have been in place has certainly been thrown out the window. When you watch the exchange between Zelenskyy (from the Ukraine), and Trump and Vance. It was quite a spectacle. And what's interesting post, you know, no deal was signed. Zelenskyy was there to potentially sign a mineral deal, which presumably would have encouraged the U.S. to want to put security forces into the Ukraine now they've got assets to protect. And I guess there wasn't enough of those security guarantees in place. But then we saw Europe kind of rally behind Zelenskyy, which is interesting. Something we alluded to in our prior podcast, would be to see whether the world starts to realign with different relationships being strengthened as the U.S. sort of takes on a very protectionist posture. And that's certainly what you saw with regard to Europe willing to step up and do more to put security forces in the Ukraine. I think the general vibe there is that Trump, more than any, seems to be willing to, you know, want to bring Russia and Putin in particular, back into the global fold. I think a lot of the rest of the world is thinking “No, this guy's been despicable”. I mean, there's obviously alleged war crimes. But the sabotage of other infrastructure, you know, he just behaved very badly and should therefore not be in a position to receive any benefit from the war that he initiated. So that was certainly a very topical Friday. It was interesting to see the market move, right? The market was sort of down on the dust-up and then up by the end of the day. I think people just don't know how to handicap exactly how these relationships are going to play out. Of course, then the tariffs are back on the table. Um, you know, might even be tomorrow we're seeing 25% and the latest is that they're going to go ahead with them. And tariffs between Canada, U.S. and Mexico, are going to be extremely messy. I mean, how many decades now have we had free trade agreements in place and supply chains have been built around that? And to think that can unwind in a day, it's going to be messy. This is going to be very messy, so we'll see what happens there. But again, these things are creating volatility, and you know they could create inflation. At the end of the day it will be the economy, it always is. But if inflation shows up because of tariffs, interest rates will go higher. That will stifle the economy and create all kinds of problems. And yes, there will be trade-offs. Encouraging drilling could reduce energy prices. The problem is energy companies don't want to drill if there are low prices, right? They want to make money, so they want higher prices to do that. So, there is probably a limit in how much increased access to Federal Reserve lands to drill, how much of a difference that could make. Labour markets could be a big difference if we start to see these mass layoffs that are talked about certainly within government workers. That can force the Central Bank to look at the other side of its dual mandate, which is maximum sustainable employment rate. So, we'll see how that plays true, but lots of pushes and pulls in the timing of any two of those things, is hard to align. So, we might see inflation before we see other deflationary pressures and let’s hope there is productivity out of AI and all of those good things. But all of that does create volatility. The numbers are pretty good. A lot of Q4 numbers are out – I mean certainly, the tech spending on AI is great. Like all the CapEx numbers out of the Microsoft, the Amazon, the Alphabets, the Metas, they're up, up, up, up and Nvidia's numbers looking very good, very strong. You know they’re ramping the Blackwell product – fastest ramp they've ever had –they're still tremendously backlogged in terms of what they want to deliver. Everyone's committing to bigger and bigger build outs. The DeepSeek does not seem to be wanting people to spend less. The bottleneck is still “How many data centres have you got? How many can you build and how many can you power up?” And so, if you can get more out to compete, you're going to install, you'll take that more, but you're not going to put in less to compete, it seems. So, the GPUs are certainly still being purchased. Anyway, so lots going on in the world. Again, our posture has been to be defensive coming into this year given the volatility, but certainly opportunities are being created. And I know given all the news of the U.S., it's hard for any other news stories to break through the surface. But Ontario had an election and a pretty rare third majority. Doug Ford's Conservatives swept the election. I think that was pretty predictable. Um, seems like there's a serious lack of competition, or at least any interest in the competition. So, it seemed an easy win for the Ford Conservatives. And we should have our Liberal Party leader at the federal level by the end of the week. So, if you're part of the Liberal Party, make sure you get to cast your vote and we'll see who we end up with. And presumably an election, might get called shortly after that leader is appointed. Anyway, so a little bit going on in Canada as well. It's not all about Trump, Trump, Trump as much as that seems to be the motivation. Anyways so we're going to stay the course here. Manage for volatility, seize the opportunities, quality will get us through. Check in with you in a month, be well.

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