The concept of a plan

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By Guest Blogger Scott Booth

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Sometimes it helps to know what the plan is.

As Canadians grapple with the approach of “Liberation Day” on April 2nd, concerns abound that extortion-by-tariff will be a feature of the quixotic orange administration’s “plans” to reshape international trade, orders and borders.

So far, threats to Canadian sovereignty and erratic on again/off again trade policy haven’t really put a dent in Canadian equity markets. The S&P TSX has been surprisingly resilient and buoyant in 2025.

The biggest shift domestically appears to be a sense of Canadian unity that exceeds any in recent memory and the rapid resurrection of the Liberal party’s corpse as polls have reversed polarity away from PP et al.

Uncertainty abounds as global players, businesses and investors try to figure out exactly what the Trump 2.0 plan is and how it will ultimately be executed.

I won’t pretend to have significant insights on how things will unfold on this front.

Successful investment management is often an exercise in managing risks when facing the unknown and not reacting to the overwhelming stream of headlines one is inundated with in this crazy digital world.

A couple key tools in the box to manage investment risk and achieve goals, are, surprise, surprise, balance and diversity.

Asset classes differ in their risk and return potential, contributing both performance and volatility over time. How one allocates between them is often seen as the most significant influence on long-term performance.

A great starting point for investing is the establishment of a suitable asset allocation that aligns with one’s risk/return profile, investment horizon and goals. Having this framework in place fosters both consistency and discipline.

Clients often call during times of turmoil and ask “What’s the plan?”.

Dump equities? Hide in GICs or T-bills?

Throw in the towel cross fingers and go buy a pre-construction condo instead?

Rush out and stock up on TP, bottled water, canned goods and ammo?

None of the above is the answer.

The plan is the asset allocation that is already in place.

For most clients it is 60% equity/40% fixed income, B&D.

The sixty of equity in the mix is made up of 1/3 Beaver, 1/3 Yankee and 1/3 International exposures. Some holdings generate cash flow from dividends, and others are more focused capital growth.

The forty in safer stuff targets stability and cashflow and gets divvied up with ¼ going into preferred shares, and the rest in bonds, both domestic and international.

The are no crystal balls. One year’s worst performer might be next year’s best. Or vice-versa. The chart below illustrates this. Having fingers in a number of different investment pies can play an important role in dampening volatility and enhancing stability in one’s portfolio.

Annual returns of key asset classes 2019-2024 (C$)

Source: Morningstar Research Inc, December 31, 2024

The most significant damage in the realm of all things balanced and diversified in 2025 has been self-inflicted. American equity markets have come under pressure and the U.S. dollar has weakened off against a basket of global currencies, as policy uncertainty weighs. On the flipside, international equity exposures have shifted into favour and nicely offset declines on the US side.

Asset performance review YTD (year-to-date) 2025

Sources: BlackRock Investment Institute, with Data from LSEG DataStream, as of March 20, 2025

During periods like this where outcomes are uncertain, having a variety of regional exposures can certainly help smooth out the ride. 2025 has been a case in point for this idea.

We’ll soon have more clarity about how much rubber will actually hit the road with tariffs.

We’ll know in a month who will lead Canada through this challenging period.

Maybe the U.S. administration’s concepts will evolve into something thought out and cohesive?

Through all this, investors are likely best served by just sticking with the plan.

If you don’t have one, you should.

Scott Booth, CFA, is a seasoned financial advisor and licensed portfolio manager. Over the past 18 years he has worked in the capital markets as an analyst, trader and advisor with major banks and now with Turner Investments.

Source: https://www.greaterfool.ca/2025/03/28/the-concept-of-a-plan/