The Canada-U.S. trade war causes the stock markets tumbling. The volatility has many worried about their investments. University of Alberta economist, Chetan Dave, joined CTV Morning Live Edmonton to discuss how to weather the financial storm.
This transcript has been edited for length and clarity.
Kent Morrison: For people who are at home watching their investments, trying to figure out the best thing to do, what’s your advice?
Chetan Dave: Going forward, I think everybody should expect a lot of policy uncertainty. If it were me, I’m obviously holding a diversified portfolio of stocks, different types of fixed income and ETFs from around the world, and I’m just not going to play with that. I’m just going to ride out the policy uncertainty in the long term, right? For long-term savings like retirement savings, in the nearer term, I’m going to save up a little bit more than I usually do for emergencies and shore up my emergency fund. For speculative investing, I’m going to hold on to cash until I see a big enough market correction in a diversified global portfolio, not just the U.S., but all over the world. If there’s a steep drop in global ETFs, then I’m probably going to buy a little bit of those in the short-term. But that’s what I’m doing for myself.
Kent: We do have some precedents because of Donald Trump’s first term, when the markets did very well. Can we draw anything from that, or is this a whole new ball game?
Chetan: I think it’s a whole new ball game, because in the first administration, Trump was constrained by adults in the room, so to speak. So people who were on the economic and financial side, who did a pretty decent job curbing the excesses of Trump’s whims. This time around, he’s a lot less constrained. He surrounded himself with basically people who just say, “Yes,” to him. We can expect a lot more policy uncertainty. We can expect a lot of back and forth. He says it himself, “Who knows what’s going to happen in the future, right?” Now somebody like him can afford to live like that, but most normal people can’t. As far as planning is concerned, I think for long-term investments, you just ride out this uncertainty and possible trade war, and in the short-term, shore up cash to make sure that you’re not in trouble in some way and then try and take advantage of opportunities.
Kent: What about those who are possibly retiring soon? Should they be concerned?
Chetan: That’s probably the folks that I’m the most concerned about, because I think with this increase in policy uncertainty, we can expect a decline in markets and a decline in yields. We’re starting to see signs of stagflation going on in the U.S. with GDP growth falling and inflation rising, and the extent to which that will translate itself into Canada, as well as a function of what happens with this trade war. It’s the folks who are just about to retire that I’m the most worried about. For them, if I was in that situation, I would just stay in cash.
