MARKET WATCH

For most of the March, global markets defied the economic headlines and traded close to their end of February values. However, given the last few trading days, most are now in negative territory. American markets have led the decent, falling more than 7% on the month, while the tech heavy NASDAQ plummeted almost 12%. International (Europe and Japan), and Canada are faring better, but still down a few points, while Emerging Markets are only mildly lower. 

As is often the case, commodities have paved their own path. Canadian energy stocks improved by a few percentage points, but the real excitement is on the metals side. Despite falling the last few trading days, the price of copper (essential for the energy transition), is still 8% higher on the month. And gold continues to shine! The price of the yellow metal is also up another 8% this month, bursting through the psychologically important US$3,000 an ounce barrier - currently trading north of US$3,100. As a result, Canadian gold stocks surged an incredible 16% this month! For perspective, the value of gold and gold stocks (we’ve owned both for more than a year), have risen more than 45% and 65% respectively over the past 12 months.

As you’d imagine, the most common topic I’m discussing these days is Canada’s trade war with the U.S. Given President Trump’s unpredictable nature, it’s hard to predict how this will resolve. I tend to think the longer it drags on, the more pressure he’ll face from adversely-affected Americans. That said, we’re dealing with someone who operates on a different wavelength, so reason and logic might not be the most effective tools here.

If Canada’s economy were to suffer, our portfolios are designed to weather the storm. Last year, we increased our fixed-income allocation, which should hold their value or even rise. Our gold holdings are likely to benefit from a flight to safety, and our growing exposure to Asian and emerging markets - with their lower valuations and stronger growth rates - should remain relatively stable.

While, as a Canadian, I’m concerned, and quite frankly, a little bothered by everything going on, I’m far less worried about our portfolios. We’re well-prepared for most scenarios and positioned to capitalize on any market weakness that might arise. 

As always, feel free to reach out if you have any questions, and if you’re looking for more timely information on the markets, you can find them on the research section of my website.

BOOKS

The Shortest History of India by John Zubrzycki: With over 1.4 billion people, twenty-two official languages, the birthplace of four major religions, and a history of multiple occupations, India is as complex a nation as you’ll find. Given that, I figured a concise history of the world’s most populous country would be the best starting point before diving deeper.

Here are my initial takeaways:

• India’s diverse population has made it challenging to govern and unify.
• Religious tensions persist to this day, often worsened by politicians who find it expedient to stoke divisions.
• Since independence, India has pursued a policy of non-alignment, maintaining friendly ties with both the U.S. and its allies, as well the Soviet bloc decades ago, and China’s today.
• Despite significant income inequality, India is a rising economic force.
• It boasts the world’s largest international diaspora, with over 17 million Indian nationals living abroad.
• India is the fifth-largest global economy and projected to be third within the next decade.
• The average age in India is under 30, compared to over 40 in the developed world.

ARTICLES & OBSERVATIONS

The Troubled Energy Transition by Daniel Yergin, Peter Orszag, and Atul Arya: Amid geopolitical distractions, it’s easy to overlook the ongoing global energy transition. This Foreign Affairs article provides an excellent overview of past energy shifts, assesses our current one, and forecasts the road ahead. Here are the points I think you’ll find interesting:

Historical Pattern: Past energy transitions added new sources rather than replacing old ones. No energy source has ever declined globally in absolute terms.

Energy Addition: Renewables are growing alongside fossil fuels, not displacing them—hydrocarbons still account for 80% of global energy!

Financial Burden: Transitioning to cleaner tech could cost $6.3-6.7 trillion annually by 2030, about 5% of global GDP.

North-South Divide: Developing nations are balancing economic growth with climate goals, while up to three billion people still lack electricity.

Mineral Constraints: Critical minerals for renewables face supply shortages, long mine approval processes, and local resistance. (This is one reason we’re invested in copper!)

Geopolitical Tensions: China dominates mineral processing and renewable manufacturing, while the U.S. counters with protectionist measures.

Electricity Demand: Surging needs from electric vehicles, manufacturing, and data centres are straining grids and complicating decarbonization.



Pragmatic Path: A realistic way forward will involve trade-offs, diversified supply chains, and sustained investment in conventional energy during the transition.

As investors, we must recognize that despite the rapid growth and falling costs of green tech, fossil fuels will remain essential for the foreseeable future. The economic rise of developing nations is too fast for renewables alone to keep up.

International Fund Flows

Why do investments increase in value? The cheeky answer is “more buyers than sellers.” But where do these buyers—and their money—come from? This often-overlooked question could have major implications in the months and years ahead.

It’s no secret that U.S. stock markets have vastly outperformed the rest of the world. Why? American companies, on average, have been more profitable, efficient, and innovative than their global peers.

This success has drawn investors worldwide, pushing U.S. markets higher. Strong corporate profits and growth have fuelled even more investment, creating a virtuous cycle.

Let’s look at some numbers.

At the end of 2009, the net international investment position (NIIP) in U.S. stocks was $2.6 trillion. By Q3 2024, foreign investment had soared to an astonishing $23.6 trillion—that’s $23,600,000,000,000!

But with an expensive U.S. market heavily reliant on international funds, many of us are asking: what happens if the U.S. underperforms? Especially if other markets regain momentum. Consider the following:

• India, with the world’s largest population, young demographics, and fifth-largest economy, is expected to grow its GDP by 6-7% over the next few years.
• China leads in green tech, robotics, and rare earths, and its economy, buoyed by government stimulus, is rebounding from a rough COVID response and property crash. (See last month’s letter for more on China.)
• Emerging markets, particularly in Asia, are poised for significant growth this decade.
• Europe might finally get its act together. With Trump’s new geopolitical stance and the Ukraine conflict, expect increased spending on defence and infrastructure, plus efforts to cut red tape which has stifled innovation.
• In Canada, the “Maple Eight” pension funds hold nearly 40% of their assets in U.S. securities. Fallout from the trade war has increased pressure to bring some of those funds home.
• The longer the trade war persists, the more it could dent U.S. corporate profits—and stock prices.

Consider this: the U.S. all-cap market is down 2.5% in 2025, while the tech-heavy NASDAQ has fallen twice as much. Meanwhile, China’s undervalued market has risen strongly this year, but remains 20% below its all-time highs. Europe is also strongly in positive territory this year.

It’s too soon to call this a major shift, but the conditions are ripe. In the eight weeks since Trump took office, his brash rhetoric—belittling allies and hinting at territorial ambitions—feels like a potential game-changer.

Middle Eastern Stock Markets - An Overview – It’s likely premature to invest in Middle Eastern stock markets, but I like to stay informed about future opportunities. Here are some highlights from the last decade of performance:

Saudi Arabia: The region’s largest market has grown 18% annually over the past decade. Energy dominates, but diversification efforts are underway - however some huge projects are delayed, over budget, and plagued by reported corruption.

Iran: The Middle East’s second-largest stock market saw an incredible 30.8% annual growth from 2014 to 2024—despite severe Western sanctions! How was this possible? These restrictions dramatically reduced competition, increasing the profits of Iranian companies, while their stocks benefited from domestic investment that had few other alternatives. However, such returns may not last, and a correction could loom due to high valuations.

UAE: The third-largest market grew 16.4% a year over the decade, thanks to a diversified economy, which has emerged as the region’s financial hub and a magnet for wealthy expatriates.



Turkey: The region’s fourth-largest stock market only grew 4.9% annualized over the decade. Turkey has struggled with high inflation and economic meddling by its leadership. Recent returns (not included in this dataset) show a sharp drop, following the politically motivated arrest of a popular politician challenging President Erdogan in the upcoming election.

THINGS TO CONSIDER

“Yesterday’s home runs don’t win today’s games.”

- Babe Ruth

“If parents have dinner, the kids have to sit at another table…it has become very clear that the Europeans are the kids.”

- Armin Papperger - CEO of German manufacturer Rheinmetall​