In shifting market, players are waiting for the new rules

Tariff confusion has caused global economic volatility that has left cautious investors eager for clarity, says Vim Thasan, portfolio manager, North American equity strategy with Beutel Goodman Investment Counsel.

Speaking on the Soundbites podcast this week, Thasan said despite recent tariff deals with China and the U.K., the U.S. continues to create market confusion. As a result, the outlook for 2025 remains uncertain, and consumers and businesses alike are nervous about spending and long-term planning.

“The best way I can describe the outlook over the next six to 12 months is that we have some fog and stormy clouds on the horizon. Visibility is very limited,” he said. “We’re not sure if it’s passing rainclouds where we have sunshine on the other side with an economic recovery in the second half, or if this could be more of a hurricane that uproots the economy.”

After a particularly volatile Q1, markets are watching headlines closely. “Everyone’s waiting for the new rules of the game before they play,” he said.

But Thasan pointed out that the current disruptions are not unlike previous disruptions, including a global pandemic, two wars, inflation spikes and a U.S. regional banking crisis.

“This is not the first time for a market shock or scare,” he said. “Like all those past events, this too will pass over time.”

He believes the potential end to American stock exceptionalism will make other markets, particularly Canada, more attractive to potential investors.

“Canada is a phenomenal market, with some global champions, domestic leaders, and a very stable economy,” he said. “So it does present very interesting opportunities.”

He pointed out that the Canadian equity market can be somewhat concentrated, comprised as it is of about 30% commodities and 30% financial stocks. But with careful stock picking and active management investors can find some great deals.

“We believe a more selective portfolio that looks for opportunities that are more micro in nature rather than macro, can offer diversification benefits.”

In particular, he likes CN Rail.

“This company has irreplaceable assets. No one can rebuild this network. It’s critical to the economy, and it has tremendous pricing power,” he said.

Though the market continues to be concerned about the possibility of a tariff-induced freight recession, he described the rail industry as a cyclical business with long-term resilience.

“The market is also likely concerned about the operational turnaround story at CN Rail,” he said. “This was one of the best-run railroads, but the story got derailed a bit with some previous management actions, so the market is skeptical on their ability to execute. We believe the stock is trading at a discount to its intrinsic value, reflecting this skepticism.”

In the U.S., he likes Kimberly Clark, the global health and hygiene company with well-known brands like Huggies and Kleenex. While he senses market skepticism over margin strain due to rising input costs, he remains bullish on the company’s prospects.

“We believe this company can continue to grow at a GDP-plus type of growth rate, entering a more growth-oriented chapter with premiumization and pricing power,” he said. “And they have room to expand their margins about 300 to 500 basis points, which should drive mid-single, high-single digit EPS growth and a revaluation of the company.”

Thasan said he worst thing investors can do is try to time the market or become paralyzed by their own emotions.

“We think it’s really important to stay invested, be selective and have a diversified and resilient portfolio,” he said. “We think the long-term perspective — playing the long game — is the right approach.”

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This article is part of the Soundbites program, sponsored by Canada Life. The article was written without sponsor input.