It’s all too easy to hit the panic button whenever President Donald Trump talks about imposing more tariffs on Canadian goods entering the United States. Indeed, trade wars are never easy to get through, and they can inflict a considerable amount of pain on a number of industries. Not to mention the effects of counter-tariffs on our wallets. Though 35% tariffs are the last thing Canada needs, I think that panicking by selling stocks or loading up on bonds is not the way to go.
When it comes to investment, making calculated decisions when you’re calm is the best course. With most of the Trump tariff fear already out of the markets back in March and April (remember Liberation Day? That was a wonderful buying opportunity ahead of one of the quickest V-shaped bounces in years), it may not make all too much sense to overreact either way to tariff developments.
Tariffs aren’t frightening markets as much anymore!
Looking ahead, tariffs represent a hurdle. On the plus side, though, negotiations are going to keep happening, and with some exemptions being granted, I do think that the scariest thing about tariffs is the threats themselves. In any case, I think the best thing investors can do is sit on their hands through turbulent times if news of tariffs has them feeling down.
With the TSX Index near its all-time highs, though, it seems like Trump tariffs aren’t able to scare markets as much as earlier in the year. As such, perhaps investors shouldn’t make too much of tariff threats. Markets have moved on, and so should investors, even though the outcome of the trade war remains a big question mark.
Perhaps it’s best to focus on shares of solid companies that can do well in these tariff times. At the end of the day, not much has changed about how investors should go about investing. Seek great companies at affordable prices and you’ll stand to do very well over the long term, whether you’re looking to build your Tax-Free Savings Account or your Registered Retirement Savings Plan.
In this piece, we’ll look at a great exchange-traded fund (ETF) pick that I think will keep moving forward, whether or not Canada and the U.S. can reach a trade deal this year or early next year.
Vanguard FTSE Canada Index ETF
Vanguard FTSE Canada Index ETF (TSX:VCE) is a terrific low-cost way to bet on the Canadian stock market with an emphasis on the larger caps. The ETF is close to new highs again, with an attractive 2.73% yield. As you’d imagine, you’re getting a lot of financial exposure from the ETF, much of which comes from the Big Six Canadian banks. Indeed, the banks have been hot again, helping propel the broad TSX Index to new heights.
They’re still cheap and bountiful, with yields well above market averages. With a decent amount of energy and tech exposure (17% and 12% weightings, respectively), the VCE is a terrific, cap-weighted yield play that’s a great buy for investors looking to keep doing well as Canada’s economy stays resilient amid tariffs and other troubles. Over the past year, shares of VCE have gained 21%, topping the S&P 500’s gain of 16.6%.
Is Canada’s market ready to outpace the S&P for a change? I think that could be the case, especially if value is destined to outshine growth again. Growth has been on a hot run, and with stretched multiples, perhaps the value-heavy TSX Index and the top-heavy VCE (the VCE has a 19.8 times price-to-earnings (P/E) ratio, far less than the S&P 500, which is going for more than 27 times P/E) are a better way for Canadians to go.
