Into the storm

Markets tanked Thursday as the world wondered what Donald Trump’s been smoking. The decline on opening was 3.5% for the mighty S&P. The Dow lost sixteen hundred points. Bay Street shed 700 at the satart of trade.

For context, the greatest one-day decline took place on a day in October of 1987. As the S&P was clobbered for 20% I sat in my Big City newspaper office and wondered how a hairy, young business editor and columnist should react. Not well, as it turned out.

The greatest one-day advance for that index, by the way, was in 1933. That 16% romp came as the US government moved to breach the Depression – which had been exacerbated (and some argue, caused) by US tariffs and a trade war.

The orange guy’s Rose Garden made-for-TV, live-audience event with a big bizarre chart showing how much he wanted to hurt each country was historic. Nobody thought an American president could be exactly that dumb. But now we have a new low bar that a male Dachshund with a gland problem could clear.

Canada could have fared worse. But still, we have an auto tariff, steel and aluminum taxes plus levies on oil, potash and all non-CUSMA items. It took 12 hours for the first car plant to say it was closing for a while. The president abrogated the trade deal he signed in his first term, and shredded the principles of the auto pack of sixty years ago. He took time yesterday in his rambling remarks to trash-talk Canada once again and moan about NAFTA as “the worst deal in history” that he said had caused 90,000 US factories to close.

A lie of course. He makes this stuff up.

Anyway, what about your portfolio? What now?

Micheal sent me this questions today: should I be buying more? And borrow to do it?

“Married, 38 Years old, household income is about 300k per year with two little kids,” he says. “We have a house worth approximately 700k fully paid off. We also have a financial portfolio currently worth about 950k that is 80% stocks 20% bonds split 40-40-20 Canada, US, International. We paid off our mortgage pretty aggressively early on, which may have been a mistake. Now the question is, would it make sense for someone in my situation to take on a HELOC loan of say, 200k to buoy the financial portfolio? What do you think?”

Leveraged investing can make a lot of sense. Portfolios get larger. Net worth can grow more rapidly. Loan interest is fully deducible for non-registered account borrowings. Your taxes are low on capital gains. You can write capital losses off, and carry them forward. All good.

But there’s risk, of course.

Global markets are selling off following the Rose Garden Gutting on fears we’re headed for a world-wide recession. America’s president is taking an unprecedented gamble that his country can suck off wealth from others in order to balance its out-of-control deficit and cut taxes for Elon. He’s also wagering the people who voted him in four months ago will happily pay thousands more for cars, endure layoffs and see the cost of living go up while the economy contracts, because he’s a genius. And a king. Even Congress and those troublesome elected people are irrelevant now. The enture global trade war has come from the Sharpie of one capricious man.

So, Mike, are you okay with buying into this storm?

I am. But then, (a) I do not have three dependents, (b) my portfolio is not already overweight in equities, like yours, and (c) I don’t leverage up with borrowed funds.

Confident and experienced people understand this market will rebound, as it always has in the past. They see a selloff for what it is. A temporary event. Also a time to deploy cash you’ve been sitting on waiting for a few bargains.

Rational people also comprehend that an irrational leader pursuing debunked policies will have to modify, surrender, retreat, capitulate, backtrack or sheepishly admit fallibility. That last thing will never happen with Trump, of course. But Republicans already nervous about the midterm elections in 2026 may play a key role in pointing out tariffs and trade wars never worked in the past, and surely will fail again. That is exactly what Mr. Market is saying today.

Don’t trade. Go play with your kids instead, Michael. Rebalance and derisk that portfolio once equity prices recover. You are gloriously debt-free, so endeavour to stay that way.

The leader of the free world is, as Mark Carney repeated yesterday, unreliable.

About the picture: “Zoe, an 8 year old Bichon Shih tzu  from Vancouver Island wondered if she could grace your wonderful blog,” writes Bonnie. “She just returned from the spa and thinks she looks pretty cute. Thanks for your informative blog.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2025/04/03/into-the-storm/