Shiraz Ahmed explains why markets have reacted so violently, how advisors should respond, and why the outcome for Canada was "less bad"
Donald Trump’s ‘liberation day’ global tariff policy went down like a led balloon with equity investors on Thursday. Markets opened down significantly, and continued that downward trend as investors digested blanket 10 per cent tariffs against most US trade partners, with some key global markets seeing significantly higher tariff rates imposed. The reaction amounts to the latest and one of the largest market reactions to US trade policy since Trump took office in late January.
Shiraz Ahmed is working to manage this volatility. The Senior Financial Advisor & Senior Portfolio Manager of the Sartorial Wealth Team at Raymond James outlined how he’s approaching market volatility on a difficult day. Ahmed is a cross-border specialist and explained his outlook for the Canadian economy and his clients with business interests on both sides of the border. In covering both themes he argued that advisors and their clients need to limit emotions in their decision making wherever possible.
“We saw leading up to Trump's remarks yesterday, markets were actually up, which is great, and then literally, as he was speaking in after hours trading, everything was falling. So unfortunately, it seems as though not all this was priced in,” Ahmed says. “the first message that we're telling everybody is to control emotion, because, unfortunately, these things are fluid. We’re dealing with high levels of volatility and high levels of uncertainty.”
From a Canadian perspective, it’s notable that our economy was arguably one of the least impacted by Trump’s announcement on April 2nd. Ahmed highlights the potential devastation that could be wreaked by 25 per cent tariffs on automobiles made outside the US, as well as tariffs on steel and aluminium. However, because no new tariffs were imposed or announced on Canada and Mexico, and because most of their goods will be exempt under the USMCA agreement, Ahmed described the overall outcome for Canada as “not good but less bad.”
Ahmed noted that many will speculate as to why Canada was relatively unscathed on ‘liberation day’ and notes that the reasons are likely myriad. He highlighted what appears to have been a tone shift since Trump spoke with Prime Minister Mark Carney in March and some speculation of a personal dislike for former Prime Minister Trudeau in Trump’s policy. Trying to understand exactly why the President has made certain announcements or policy decisions, however, seems to be a futile exercise often laced with emotion and bias.
Instead, Ahmed is talking to his clients about the facts of the situation. Taking onboard facts of both stock markets and the Canadian economy, he shows his clients that we’re coming off some relatively strong periods in terms of market returns. The market correction, too, is still within the bounds of ‘normal’ — between ten and fifteen per cent. He believes that the emotional and political nature of this particular pullback has made it feel more acute for investors than the numbers alone would imply.
Moreover, the reasons for a pullback in the market and uncertainty about the Canadian economy are largely tied to one source: US policy. While he expects volatility to continue in the short-term, he thinks that as accommodations are reached and new dynamics are normalized that we may see a degree of certainty return to the market. He describes his medium-term view as “cautiously optimistic.”
Some of that cautious optimism comes from Ahmed’s first-row seat to the US and Canada’s tariff wrangling since February. He notes that many of the hard-line stances first taken by the US administration have been walked back and watered down in subsequent days. He believes that there will be negotiations following imminently that see some of these tariffs softened for key trading partners.
While Ahmed cautions against knee-jerk reactions, he’s not against strategic reviews of asset allocation strategies. He uses an algorithm-driven strategy that allows his allocations to “breathe with the market” somewhat, resulting in more regular rebalances. That involves taking some risk off the table in this moment, minimizing exposure to north America, and looking at treasuries, alternatives, and gold as diversifiers. Rather than proscribing a set strategy, however, Ahmed believes that advisors need to commit to what they believe in and communicate that commitment rationally.
“Whatever your discipline or your approach is this is the time to maintain it, whatever it may be,” Ahmed says. “Sometimes there's an expectation from clients that we take action right now, but you have to be cautious about acting for the sake of acting, versus taking action that will actually improve the outcome.”
